Wednesday, October 7, 2015

A Leveraged Inverse Volatility Product

Thanks to a reader, I recently learned of a leveraged inverse volatility product.

I asked SeekingAlpha if they would be open to the publication of an article on this. They declined as it is listed on a European exchange.

First, before we go any further, you need to understand the risk factors involved with this product. Since it is listed on the German exchange, you can only trade it during German exchange hours using a broker that allows such transactions. Exchange rates may also play a role in the profitability of your trading. There is much more to it than this, so you would need to speak with your broker. I personally called Schwab and was directed to the Global Trading Desk. I will follow up with them on the requirements for trading. If anything new comes about I will post it here.

If you are a big risk taker and would like a product like this, maybe just trading XIV or SVXY on margin would work better for you to obtain the two times leverage.

To be clear, I wouldn't ever recommend trading volatility on margin. This post is also not an endorsement of the product being mentioned. I just find it interesting and I really hope one of these products makes its way to the U.S. soon. There is certainly enough demand for it and where there is a possible profit, there will be products.


ISIN: DE000ETN0727

Chart taken from:

I tried working on a comparison chart but it would have taken me forever. Here are some basic results.

On 11/18/2011 ETN727 was at 46.90 Euros. On 11/18/2011 XIV was at $5.17 USD. Exchange rate EUR/USD 1.352

At their respective peaks on 7/3/2014 ETN727 was at 2393.42. On 7/3/2014 XIV was at $47.27. Exchange rate EUR/USD 1.3603

Gain for ETN727: 5003%
Gain for XIV: 814%


At you can see, during periods of rising volatility both of these products, more so ETN727, take severe haircuts.


This article is just something to ponder and I hope we can start a discussion about how the results of the German ETN were so much better than that of XIV.

Thanks for reading, as always!


  1. This thing looks fascinating, although it appears to be very thinly traded. Just started digging into it, it seems to be an ETN issued by German Commerzbank and it's called Coba ETN 2x VIXf Daily Short.

    There's also a 1x Daily Short as well issued by the same bank - this one seems to come very close to XIV/SVXY, performance-wise. Will dig into it some more, but thanks for letting us know about this, real interesting stuff!

  2. Hi Nathan
    Thank you for your articles on volatility
    I want to learn to trade XIV.
    Which reference is best to know whether futures are in contango or backwardation?
    How can i contact you?

    1. Hi George, I have a good article on XIV here:

      Feel free to contact me on SeekingAlpha. Please note I do not provide any direct buy/sell investment advice.

      Thanks for reading!

  3. Hey Nathan. I am looking for a broker to trade this ETN. Did your broker get back to you, or do you know any broker that trades this product?

    1. I never heard back from them and haven't followed up for a couple reasons. One, I am busy with school and the bigger reason is I wouldn't invest in the product right now. Schwab has great 24 hour USA customer service so anything you want to know, just give them a call and they will let you know.