VIXY vs SPXU, page-20

Hi Flem

The title of this thread has 2 derivatives in the title that are very different from each other and that is why it is probably confusing.

It is a good question and no the VIXY it is not like BEAR.

BEAR is an ETF designed to deliver non leveraged inverse results to the ASX.

Simply put, the SPXU is a 3X leveraged American version of BEAR. It is based on the S&P500 index.

The VIXY is based on the VIX index.

http://en.wikipedia.org/wiki/VIX

Thorburn appears to be considering using these tools to take advantage of a repetitive market phenomena.
Equity markets move from very volatile periods to less volatile periods, so based on the fact that we have moved to historic low periods of volatility when looking at the VIX, it is only fair to assume that it will be followed by a period of higher volatility. The question is all about timing. Right now all this central bank market intervention has created the illusion that the market is a safe place to invest, that's why the VIX is so low.

These are great instruments when used correctly, but it is for experienced participants who understand how to prepare for contango and backwardation risk. Another risk is how they accurately they will reflect the VIX when the s**t hits the fan. Many of these instruments have only been around in a lower volatility environment.

I have little doubt that if we have another GFC event, some of the more exotic and less liquid ETFs will go the way of the Dodo.

Hope this helps a bit.