Investment Strategy Overview
The fund invests a majority of its assets in bond instruments. The remaining 10% is invested in S&P 500 call and put options. The options are never net short the market. The goal of the options is to utilize their inherent leverage to drive market like returns while the ultra-short duration fixed income dampens volatility. The call and put options are automatically rebalanced based on the market levels. As the market increases in price, the long positions are decreased, and vice versus. We believe this consistent rebalance drives favorable returns for the portfolio.
The ultra-short fixed income component of the ETF will at times hold:
Highly rated short-term corporate debt
Certificate of Deposits
Highly rate short-term municipal debt
The fund holds S&P 500 call options for its long market exposure.
VectorShares creates a synthetic Spot VIX portfolio comprised of options to take advantage of volatility. The synthetic VIX is designed to offset loses on the long positions during periods of market volatility.