What is the VIX?
Here’s how it works
IMPORTANT DISCLOSURES – PLEASE READ:
Investors should carefully consider the investment objective, risks, charges and expenses of the Measured Risk Strategy Fund. Mutual funds involve risk, including possible loss of principal. There is no guarantee the Fund will meet its objective. This and other information is contained in the prospectus and should be read carefully before investing. For a prospectus please call Measured Risk Portfolios at (855) 907-3407. The Funds are distributed by Northern Lights Distributors, LLC, member FINRA / SIPC. Northern Lights Distributors, LLC is not affiliated with Measured Risk Portfolios, Inc. 4323-NLD-2/25/2019
The Fund employs various strategies seeking to achieve the objective of capital appreciation and income. The primary tool to achieve this objective is the use of options. Options involve risk and are not suitable for all investors. Purchased put or call options may expire worthless and may not deliver the expected return due to time value decay. Written call and put options may limit the Fund’s participation in gains and may amplify losses in market declines. The Fund’s losses are potentially large in a written put or call transaction. If un-hedged, written calls expose the Fund to potentially unlimited losses.
Volatility Exchange Traded Products (ETPs) may have significantly greater daily movements that that of the broad US equity markets. Investors cannot directly invest in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. The Fund may invest or buy or sell options on volatility related ETPs, such as: (holdings are subject to change and should not be considered investment advice)
VIX: The CBOE VIX (S&P 500 Volatility Index) is a measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. The VIX is forward looking and seeks to predict the variability of future market movements. This is in contrast to realized (or actual) volatility which measures the variability of historical (or known) prices.
Short VIX: A “short VIX” investment is one that is designed to correlate negatively or move opposite of the Chicago Board Option Exchange Volatility Index (VIX). These investments may take many forms but are typically Exchange Traded Funds (ETF) or Exchange Trades Notes (ETN). They may also be designed to have various ratios to the daily movement of the VIX (for example 2 times or .5 times) in which case they are also referred to as leveraged or geared ETFs or ETNs
SVXY: ProShares Short VIX Short-Term Futures ETF seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the S&P 500 VIX Short-Term Futures Index.
XIV: The VelocityShares Daily Inverse VIX Short Term ETN provides -1x leveraged exposure to an index comprising first- and second-month VIX future positions with a weighted average maturity of 1 month.
VXX: The iPath S&P 500 VIX Short-Term Futures ETN tracks an index with exposure to futures contracts on the CBOE Volatility Index with average 1-month maturity.
ETPs are subject to investment advisory and other expenses, which will be indirectly paid by the Fund. As a result, the cost of investing in the Fund will be higher than the cost of investing directly in ETFs and may be higher than other mutual funds that invest directly in stocks. ETFs are subject to specific risks, depending on the nature of the Fund.
The use of leverage, such as that embedded in options, could magnify the Fund’s gains or losses. Written option positions expose the Fund to potential losses many times the option premium received.
The adviser’s use of trading algorithms and judgments about the attractiveness, value and potential appreciation of particular ETPs and options in which the Fund invests or sells may prove to be incorrect and may not produce the desired results.