NEW YORK ( TheStreet) -- First Trust recently launched the CBOE S&P 500 Tail Hedge Fund (VIXH) where the word tail refers to some sort of outlying event that would take the equity market lower. The fund is interesting conceptually but is complicated under the hood.The nuts and bolts are that the fund will always own the S&P 500 and will usually own call options that expire next month on the CBOE Volatility Index, commonly referred to by its symbol; VIX. The amount of VIX call option exposure will depend on the level of the VIX futures due to expire next month. If next month's VIX futures are 15 or less the fund will own no VIX calls. If VIX futures are between 15 and 30 the fund will allocate 1% of the portfolio into VIX calls. If VIX futures are between 30 and 50 the fund will allocate 0.50% to VIX calls and above 50 no calls will be purchased.
ETF Hedges Extreme Market Behavior
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