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

seekingalpha06-09

TERADAT SANTIVIVUT 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 ...

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One way investors can take advantage of equity rallies is through ...</p>\n\n<a href=\"https://seekingalpha.com/article/4698273-svol-sees-big-improvement-but-still-the-wrong-place-to-be\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>SVOL Sees Big Improvement, But Still The Wrong Place To Be</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSVOL Sees Big Improvement, But Still The Wrong Place To Be\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-09 23:15 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4698273-svol-sees-big-improvement-but-still-the-wrong-place-to-be><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>TERADAT SANTIVIVUT 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 ...</p>\n\n<a href=\"https://seekingalpha.com/article/4698273-svol-sees-big-improvement-but-still-the-wrong-place-to-be\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"UVXY","symbol_name":"1.5倍做多恐慌指数短期期货ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4698273-svol-sees-big-improvement-but-still-the-wrong-place-to-be","article_id":"2442863070","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1402306256/image_1402306256.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2442863070","pubTimestamp":1717946155,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"TERADAT SANTIVIVUT 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. One such fund is the Simplify Volatility Premium ETF , which I last covered back in December, noting I didn't particularly like it and slapping a hold rating on it. Seeking Alpha The price basically hasn't moved since then, but with the distributions fund holders have received, it's returned a little over 7%. That's not bad, but a simply buy-and-hold of the S&P 500 would have returned almost double that. Given the construction of SVOL, and where I believe we are in the equity market cycle, I still don't think SVOL is the place you want ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"UVXY":"1.5倍做多恐慌指数短期期货ETF","SVOL":"Simplify Volatility Premium ETF","SVXY":"0.5倍做空波动率指数短期期货ETF","VXX":"短期VIX期货ETN","VIXY":"波动率短期期货指数ETF","TVIX":"二倍做多VIX波动率指数短期期权ETN","BK4585":"ETF&股票定投概念"},"translate_title":"SVOL看到了很大的改善，但仍然不适合","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SVOL":1,"TVIX":0.9,"VXX":0.9,"VIXmain":0.6,"SVXY":0.6,"UVXY":0.6,"VIXY":0.6},"content_text":"TERADAT SANTIVIVUT 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. One such fund is the Simplify Volatility Premium ETF (NYSEARCA:SVOL), which I last covered back in December, noting I didn't particularly like it and slapping a hold rating on it. Seeking Alpha The price basically hasn't moved since then, but with the distributions fund holders have received, it's returned a little over 7%. That's not bad, but a simply buy-and-hold of the S&P 500 would have returned almost double that. Given the construction of SVOL, and where I believe we are in the equity market cycle, I still don't think SVOL is the place you want to be. What is SVOL? Let's recap what SVOL is (and isn't) to remind ourselves of what we're dealing with. The goal of SVOL is to short the VIX, but only at a rate of ~0.25X. In other words, in a world of -1X, -2X, and even -3X short VIX funds, this one is a much lower rate of shorting the VIX. That reduces the volatility of the fund, but also reduces the potential returns of the fund. Instead of trying to produce massive amounts of capital appreciation, SVOL instead looks to generate income from its positions, and return it in large amounts to shareholders. SVOL generates income by shorting the VIX, but also has a hedge against an extreme VIX spike to avoid wiping out shareholders in a black swan event. As a reference, that hedge at the moment is 50 strike price calls in the VIX. For context, the VIX has hit 50 only four times in the past 20 years by my reckoning, so it's truly an extreme VIX spike hedge. With that in mind, the fund is providing shareholders an annualized distribution yield of about 15%, returning 30 cents per share monthly. One of the things I pointed out in December was that the fund wasn't covering its distributions with actual income, and was instead returning capital. That, however, is not the case thus far this year. Fund website This is a big improvement in my eyes, as we can see each of the last four distributions have been entirely covered with income from the fund. This is as it should be, and SVOL is doing a great job of creating income and getting it in the hands of shareholders. How long this continues is anyone's guess, but for now, this is a big improvement. The fund's first quarter returns consisted of 3.6% in total, 2.3% of which came from the VIX futures curve from contango, cash investment of 1.0%, and the balance from fixed income holdings. The fund noted it's shorting the VIX and hedging such that even if the VIX rises modestly, it should be okay from an income generation perspective. As I said, SVOL is doing a nice job, and much better than it was in December, in my opinion. So why am I keeping a hold rating? The VIX environment in the past five months or so has been absolutely ideal for shorting the VIX, and the fund has vastly underperformed simply holding the S&P 500. I don't see how SVOL could possibly improve on that given the VIX is already low, so the only shot at outperforming is if we get a big equity selloff. Could that happen? Sure. Do I believe that will happen? No, I think we're going to continue to see a low VIX, high equity price environment and if that's the case, I'd rather just own equities. Wrapping up I want to be clear that I see SVOL as doing a much better job of executing on its strategy than it was last time I covered it. The problem is that even if it is executing perfectly, the construction of the fund is not one that is likely to outperform during a bull market in equities. I continue to believe that's what we're going to see, and as such, I don't want to own SVOL. If we get to the point where equities are going to roll over, we may see the SVOL outperform, but I simply don't see that anytime soon. StockCharts The chart here is less instructive given SVOL is an income fund, but we can see the move here has been in a fairly straight line. In the bottom panel I've got the SVOL against the S&P 500 underperforming and I believe that's what we're going to see for the foreseeable future. At some point, equities will become less attractive and maybe SVOL rises to the top, but I simply don't see it for now.  If it's total returns you're after, simply buying stocks is better than owning SVOL, which really doesn't move much. If it's income you're after, covered call funds and the like are better choices in my view. I'm keeping my hold, as I don't dislike SVOL from an execution perspective, but I do think the construction of it is simply not the one you want to own in this environment.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2442863070"}