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      Market Data provided by CME Group & powered by dxFeed Technology. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
      Market Measures

      Low Volatility ETFs

      Dec 11, 2017

      How do Low Volatility ETFs work and is this a product we should be investing in? Tune in as Tom and Tony break it down in today’s Market Measure!

      Low volatility ETFs seek to mimic the returns of an index, but with a lower amount of volatility in returns. They select stocks which have a high correlation, but exhibit a lower volatility. These funds are sometimes called “Smart-Beta” funds. For today we look at two popular low volatility ETFs the S&P 500 Low Vol ETF (SPLV) and the USA Minimum Vol ETF (USMV).

      In the past, correlations between low vol etfs and the SPY have been near 0.9. In 2017, these correlations have begun to diverge, with SPLV at 0.65 and USMV at 0.72.

      Historically we’ve seen that USMV and SPLV do limit drawdowns some, but you give up returns when the market goes up. Do these ETFs really have a lower volatility? With such low volatility over the past year, low vol ETFs have barely had a lower standard deviation of daily returns when compared to SPY.

      Are there any other types of strategies using options that we could employ that could mimic the risk to returns of these low vol ETFs? Tune in to hear Tom and Tony run through the results!

      This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

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