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Volatility

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MVIS launches US Volatility Premium Capture Index

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Market Vectors Index Solutions (MVIS) has launched the Market Vectors US Volatility Premium Capture Index (MVVCAP).

“The Market Vectors US Volatility Premium Capture Index is the first investment strategy index launched by Market Vectors Index Solutions. The index benefits from the behavioural biases that result in investors paying too much to insure against future losses of their equity holdings,” says Lars Hamich, CEO of Market Vectors Index Solutions. “MVVCAP is unique because it dynamically adjusts to different volatility regimes. With all this in mind, we are very pleased to be adding the Market Vectors US Volatility Premium Capture Index to our current set of indices.”
 
MVVCAP seeks to exploit the well-documented tendency of investors to overpay for the downside protection of their equity holdings by writing put-option contracts.
 
The index implements a rules-based process to reflect out-of-the-money put-option contracts on the SPDR S&P 500 ETF, an exchange-traded fund (ETF) that represents a diversified group of large-cap US equities.
 
MVVCAP seeks to control risk by adjusting the strike prices of the put-option contracts represented in the index based on the volatility of the securities included in this ETF.
 
MVCAP is designed to maximise the returns of the index, and thereby maximise the likelihood that the put-option contracts represented in the index will expire without value by: writing put-option contracts on a diversified group of US-based large-cap equities; writing the put-option contracts out-of-the-money; and, adjusting the put-option contracts’ strike prices based on the volatility of the underlying securities.

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