SVOL - SVOL Sees Big Improvement But Still The Wrong Place To Be

2024-06-09 11:15:55 ET

Summary

• 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.

The rally in US equities we've seen this year has created plenty of winners, and of course, some relative losers. One way investors can take advantage of equity rallies is through the VIX, which inevitably plummets during extremely bullish periods. We've seen that again this year as investors gradually price in less and less volatility through options premiums, and funds that short the VIX in one way or another have seen big up moves....

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