Investors who bought into inverse volatility-linked exchange traded funds (ETFs) on the recommendation of their broker or financial advisor may be able to recover their losses in FINRA arbitration. Inverse volatility-linked investments are designed to return a profit when the market experiences periods of calmness, or low volatility. However, unlike more traditional investments and strategies such as a buy-and-hold stock portfolio, investing in volatility-linked products is extremely complex and risky, and therefore, not likely a suitable strategy for the average, retail investor.
Certain inverse ETFs are structured to provide investors with returns that are positive when the CBOE Volatility Index (the “VIX”) falls, and negative when the VIX rises, and investors in these products essentially are taking the view that the market will remain relatively steady. However, earlier this month stock market volatility and the VIX rose rapidly as the stock market whipsawed erratically.
ETFs that lost value during this market turmoil include the following: