Which Volatility Hedged ETF Should You Consider? – Zacks.com

Which Volatility Hedged ETF Should You Consider? – Zacks.com

A must for SIMM class where we just mentioned this in class:

“The tail risk hedge takes care of extreme market volatility which can potentially result in a crash. Therefore these events are considered to be outliers which normally do not fall within three standard deviations of the average of the implied volatility.

The Volatility Index and the S&P 500 basically have a very strong negative correlation. Therefore, to hedge against the S&P 500 volatility, the ETF takes a long position in VIX Call options”

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