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Volatility ETNs: A Viable Hedging Instrument

12 Jun 2011

Article by: Oliver Schwindler
Published by: Seeking Alpha
Date: 18 May 2011

“Despite the controversial discussion about ETNs focused on volatility, these instruments have caught a lot of interest from investors. However, it’s difficult to judge whether it’s mainly retail investors with a buy and hold approach or traders using these instruments for short term trading/hedging or even sophisticated investors like hedge funds who invest/trade these instruments.

“In my view the biggest critique seems to be the fact that both ETNs – iPath S&P 500 VIX Short-Term Futures ETN (VXX) and the iPath S&P 500 VIX Mid-Term Futures ETN (VXZ) – are constantly loosing value. I will present a quick study which clearly shows that these ETNs are viable hedging instruments even for a traditional buy and hold investment approach.”

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