5 Best VIX ETFs In Canada: Buy The Fear Index (2022)

Investors generally want to know which way the stock market is headed so that they can make more well-informed investing decisions to capitalize on the movement. Unfortunately, there is no perfect method to accurately predict the market movement.

One popular method to gauge the direction it’s heading in is the Chicago Board Operations Exchange’s Volatility Index, also called VIX, which tracks the expected market volatility.

If you are interested in investing in VIX, there are financial instruments that let you do that. VIX itself is uninvestable, but you can invest in financial instruments that respond to the fluctuations in the index, including Exchange-Traded Funds (ETFs).

This post is my guide to the best VIX ETFs in Canada if you are looking for a method to buy the fear index to capitalize on fluctuating market price movement expectations.

Best VIX ETFs In Canada

What Is the CBOE Volatility Index (VIX)?

The CBOE VIX Index is a perplexing tool to measure the expected volatility in the stock market based on S&P 500 Index options. CBOE VIX measures the short-term volatility of the S&P 500 indexes. VIX began in 1993, and 2004 saw VIX futures and options contracts begin trading on stock markets.

CBOE VIX index measures the short-term market volatility of the option prices of the S&P 500 Index (SPX) derived from a range of call and put options. VIX levels above 30 typically represent high volatility levels, while VIX levels below 20 represent low volatility.

The VIX Index is often called the Fear Index because it is considered an indicator of investor confidence or fear in the market, therefore the level of investment risk. Trading on VIX levels essentially allows traders to invest in market volatility regardless of the real-world direction of equity market price movements.

What Are VIX ETFs?

Investing in VIX ETFs is essentially akin to buying the “fear index” and it is a very speculative play that I would consider little more than gambling with your investment capital than high-risk investing.

If you are a self-directed investor comfortable with the risks of losing some or all of your initial investment, you can consider investing in the financial instruments that respond to this fear index, and the assets in this guide might be the ideal way to achieve that exposure.

Remember that VIX ETFs do not necessarily reflect the VIX index itself. Rather, these funds attempt to emulate the effectively uninvestable index. The return pattern of VIX ETFs differs drastically from that of the VIX index.

These ETFs are also heavily reliant on the VIX futures curve and these funds see their positions decay over time.

The decay in their exposure leaves them with less money to roll into the next futures contracts when the current contract expires.

The process repeats itself and leads to several significant losses over the course of a typical 12 months, ending up with the funds almost always losing more than they gain in the long run.

Traders who know and understand these financial instruments typically consider them as very short-term tactical tools rather than long-term buy-and-hold assets. Traders tend to speculate with VIX ETFs. You will find short-term VIX ETFs that offer greater one-day sensitivity to the index than mid-term VIX ETFs do.

VIX ETFs are also not ETFs in the strictest sense like most other ETFs. These also come in the form of Exchange-Traded Notes (ETNs) and commodity pool structures.

Best VIX ETFs in Canada

This section of my guide to the best VIX ETFs in Canada will give you a quick overview of several investment vehicles you could consider adding to your portfolio if you want to explore volatility-tracking ETFs.

This list contains Canada-listed and US-listed ETFs because there are not too many Canadian VIX ETFs available. And yes, you can buy US-listed ETFs in Canada. You just need to ensure that you are using a trading platform with a USD account, like Questrade or Wealthsimple.

Let’s take a quick look at the best VIX ETFs in Canada.

1. Horizons BetaPro S&P 500 VIX Short-Term Futures ETF (HUV)

horizons logo

Some facts about Horizons BetaPro S&P 500 VIX Short-Term Futures ETF (HUV):

  • Ticker: TSX:HUV
  • Inception Date: December 15, 2010
  • Assets Under Management: $84.85 million (as of January 14, 2022)
  • Management Expense Ratio: 1.00%

Horizons BetaPro S&P 500 VIX Short-Term Futures ETF (HUV) is a fund designed to provide you with investment results by attempting to emulate the performance of the S&P VIX index.

Any US dollar gains or losses as a result of the fund’s investments will be hedged back to the Canadian dollar before fees, expenses, distributions, brokerage commissions, and other transaction expenses.

The idea behind the fund is to have a short-term hedge against market volatility spikes in the S&P 500 Index. It is an expensive fund to own, with an MER of 1.00% due to the active strategy the fund manager uses to try and emulate the VIX index.

Horizons BetaPro S&P 500 VIX Short-Term Futures 2X Daily Bull ETF (HVU) was another short-term futures ETF that launched on the TSX alongside BetaPro HUV ETF, but it closed on June 5, 2018, due to the risks associated with the high-risk and speculative approach that VIX ETFs take.

It would have been the only other Canada-listed VIX ETF besides BetaPro HUV ETF.

2. ProShares VIX Mid-Term Futures ETF (VIXM)

ProShares logo

Some facts about ProShares VIX Mid-Term Futures ETF (VIXM):

  • Ticker: BATS:VIXM (USD Only)
  • Inception Date: January 03, 2011
  • Assets Under Management: US$113.85 million (as of January 14, 2022)
  • Management Expense Ratio: 0.85%

ProShares VIX Mid-Term Futures ETF (VIXM) seeks to provide you with investment results before fees and expenses that track the performance of the S&P 500 VIX Mid-Term Futures Index.

The fund is designed for seasoned investors who want to profit from increases in the expected volatility of the S&P 500 index as measured by the prices of VIX futures contracts.

Intended for short-term use, ProShares VIXM ETF’s performance has been historically negatively correlated to the S&P 500 returns.

The fund does not track the performance of the CBOE VIX Index directly, and you can expect its performance to differ drastically from the VIX index. The fund is costly to own and comes with an MER of 0.85%.

3. ProShares Short VIX Short-Term Futures ETF (SVXY)

ProShares logo

Some facts about ProShares Short VIX Short-Term Futures ETF (SVXY):

  • Ticker: BATS:SVXY (USD Only)
  • Inception Date: October 03, 2011
  • Assets Under Management: US$423.86 million (as of January 14, 2022)
  • Management Expense Ratio: 1.38%

ProShares Short VIX Short-Term Futures ETF (SVXY) seeks to provide investors with daily investment results corresponding to one-half the inverse of the daily performance of the S&P 500 VIX Short-Term Futures Index, before fees and expenses.

The fund is not essentially benchmarked to the VIX index, and you can expect it to perform very differently from the VIX.

The fund is designed for seasoned investors who want to try and profit from decreases in the expected volatility of the S&P 500 based on the prices of VIX futures contracts. Intended for short-term use, the actively managed SVXY ETF is a risky and high-cost fund that comes with an MER of 1.85%.

4. ProShares Ultra VIX Short-Term Futures ETF (UVXY)

ProShares logo

Some facts about ProShares Ultra VIX Short-Term Futures ETF (UVXY):

  • Ticker: BATS:UVXY (USD Only)
  • Inception Date: October 03, 2011
  • Assets Under Management: US$816.76 million (as of January 14, 2022)
  • Management Expense Ratio: 1.65%

ProShares Ultra VIX Short-Term Futures ETF (UVXY) is a find that seeks to provide you with daily investment results that correspond to one and a half times the daily performance of the S&P 500 VIX Short-Term Futures Index, before fees and expenses.

The fund is benchmarked to an index of VIX futures contracts, not the CBOE Volatility Index itself. It means that you can expect the fund to perform very differently from one and a half times the performance of the VIX index.

UVXY ETF is designed for seasoned investors who want to profit from increasing expected volatility in the S&P 500 based on the price performance of VIX futures contracts. Intended for short-term use, the fund is a volatile and high-risk financial instrument that comes with a high 1.65% MER.

5. iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX)

iPath Series

Some facts about iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX):

  • Ticker: BATS:VXX (USD Only)
  • Inception Date: January 19, 2018
  • Assets Under Management: US$841.52 million (as of January 14, 2022)
  • Management Expense Ratio: 0.89%

iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) is one of the biggest and best-performing VIX ETFs, even though it is technically structured as an ETN. VXX ETN is a 30-year ETN that holds first- and second-month futures contracts with a maturity date set for January 23, 2048.

It’s important to remember that VXX ETN does not represent a spot investment in the VIX. Rather, it is linked to an index that comprises VIX futures contracts.

The performance of the ETN is likely going to stray drastically from the real-time performance of the VIX index. The high-risk and high volatility fund can be expensive to own, coming with an MER of 0.89%.

How Do You Buy VIX Calls?

Purchasing VIX call options contracts that give you the right to buy the VIX could be considered a good hedge against downturns in the S&P 500 Index than buying SPX put options, which give you the right to sell the VIX instead of buying it.

VIX trades within a given range and bottoms out around ten. If it were to ever go to zero, it would mean that the expectation was for zero daily movements in the SPX.

The VIX index has spiked in the past when the SPX has crashed, but it cannot stay consistently high because it would mean that the market expectation was for significant changes over an extended timeframe.

A fixed trading range, no matter how volatile, effectively means that VIX options offer a good opportunity for traders to speculate. However, the value of the options is derived from the forward value using current and next month options contracts, entailing more substantial volatility than other financial instruments.

The VIX is a very risky index to invest in due to its capacity to decline just as quickly as it rises, leading to immense financial losses for investors.

How Can I Get Long VIX Index?

Stock market chart

Like with all indexes, you cannot buy the VIX directly. Instead, you can take a position in VIX and invest in volatility through VIX-based Exchange-Traded Products (ETPs) like VIX ETFs and VIX ETNs.

If you want to get exposure to the long VIX index, the VelocityShares Daily Long VIX Short-Term ETN was an offering that you could consider, but the ETN has been delisted, and further issuance has been suspended.

How To Buy The Best VIX ETFs In Canada

The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:

ImageProduct TitleFeaturesPrice
Editor's Choice
Wealthsimple Trade
Wealthsimple Trade
  • ETF buys and sells have $0 trading fees
  • Desktop and mobile trading
  • Reputable Brand
  • Beautiful Design
Get $50 Signup Bonus
Reliable Pick
Questrade
Questrade
  • ETF buys have $0 trading fees
  • Desktop and mobile trading
  • Most types of accounts available
Get $50 Free Stock Trades

To learn more, check out my full breakdown of the best trading platforms in Canada here.

Conclusion

If you are an investor considering investing in the best VIX ETFs in Canada, you should understand that these are not great proxies to track the performance of the spot VIX.

All these funds tend to perform very differently from the VIX index. Some of these ETFs and ETNs may rise and fall along with VIX, but the rate of their price movements and the lag can make it challenging to identify the entry and exit points to make profitable trades for even the most experienced traders.

That said, market volatility investments are best-suited for investors with a short time horizon who can move quickly to change their positions if the market turns against them. ETFs typically offer a hands-off method to invest in a group of assets – something you do not get with VIX ETFs.

If you are looking for a safer and hands-off exposure to the performance of the US stock market, take a look at my list of the best S&P 500 ETFs in Canada for financial instruments that you could consider adding to your portfolio.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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