SVOL Sees Big Improvement, But Still The Wrong Place To Be
The Simplify Volatility Premium ETF (SVOL) has returned a little over 7% with distributions, but a buy-and-hold of the S&P 500 would have returned almost double that. SVOL aims to short the VIX at a rate of ~0.25X and generate income from its positions, providing shareholders an annualized distribution yield of about 15%. The fund has improved in executing its strategy, but the construction of SVOL is not likely to outperform during a bull market in equities.
SVOL: Looks Interesting Because Of The VIX Curve And Upcoming Elections
Simplify Volatility Premium ETF generates income by selling VIX futures and investing in income-producing securities like high-yield and government bonds. The SVOL ETF also buys out-of-the-money VIX calls to hedge against tail risks and cap potential losses. Despite the low current VIX levels, the strategy may still be effective depending on the forward VIX futures curve and potential future events.
