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.
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!