Volatility ETPs: When Traders Cash in on Turbulence

The year 2016 has been a challenging year for traders across nearly all asset classes. Periodic turmoil has gripped financial markets, especially as investors have been bracing themselves for an interest-rate hike after the Federal Reserve contemplated an increase this past December. Stock prices have swung violently as investors digest more economic and geopolitical uncertainty, most recently through the United Kingdom’s vote to leave the European Union (EU).

While strong, swift market selloffs have rattled many investors’ nerves, they’ve provided others with the opportunity to profit off of the turbulence. The recent surge in volatility has ignited demand for volatility exposure, which has led to a rush into exchange-traded products (ETPs), including exchange-traded funds (ETFs) and exchange-traded notes (ETNs) tracking the CBOE VIX Index (VIX).

VIX products have become wildly popular this year amid market turbulence from monetary policy decisions and geopolitical events. As the Fed contemplates tightening monetary policy further and the world digests the Brexit decision, investors will likely get more chances to utilize these products in anticipating market swings.

This TABB Group report analyzes the current universe of volatility ETPs and explores why these products are gaining favor with traders.