Best VIX ETF UK – Compare Top ETFs 2021

The VIX tracks volatility in the S&P 500 and is often called the market’s ‘fear gauge.’ With a VIX ETF, you can speculate on whether market volatility will go up or down.

In this guide, we’ll review the best VIX ETF UK for 2021.

Best VIX ETF UK 2021 List

Here are the 5 best VIX ETFs in the UK that you can trade in 2021:

  • iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) – Overall Best VIX ETF UK – Invest Now
  • ProShares Short VIX Short-Term Futures ETF (SVXY) – Best Short VIX ETF – Invest Now
  • VelocityShares 1X Long VSTOXX Futures ETN (EVIX) – Trade Volatility in the STOXX 500 – Invest Now
  • VelocityShares Daily Long VIX Medium-Term ETN (VIIZ) – Best Mid-Term VIX ETF
  • LHA Market State Alpha Seeker ETF (MSVX) – Best Alternative VIX ETF

Best VIX ETFs UK Reviewed

Let’s take a closer look at the 5 best VIX ETFs (exchange-traded funds) and ETNs (exchange-traded notes) in the UK so you can decide which one is right for you.

1. iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) – Overall Best VIX ETF UK

The iPath VIX Short-term Futures ETN (exchange-traded note) is the premiere fund for tracking volatility in the S&P 500 index, with over $1 billion in assets under management. The fund tracks a basket of futures contracts representing what investors think the VIX will be in 1-2 months’ time. So, it might not perfectly track the VIX itself, but it does represent near-term thinking about volatility in the equity market.VXX Chart best vix etf uk

Importantly, the VXX fund uses a daily rolling position in these futures contracts. That means that the fund’s holdings change on a daily basis, so you’ll want to use this ETN for day trading only. Over the long term, the fund always produces a negative return.

The fund has an expense ratio of 0.89%, which is pricey. However, that fee level is standard among the best VIX ETFs since they are actively managed funds.

67% of retail investor accounts lose money when trading CFDs with this provider.

2. ProShares Short VIX Short-Term Futures ETF (SVXY) – Best Short VIX ETF

The ProShares Short VIX ETF is an inverse ETF designed for investors who believe that market volatility will go down, not up. The fund seeks to mirror the one-half the inverse of the S&P 500 VIX Short-term Futures Index, which is the same index that the iPath Short-term Futures ETN (VXX) replicates. So, if volatility shrinks by half, the value of the SVXY ETF will rise by 25%.SVXY Chart best vix etf uk

This fund looks primarily at futures contracts for the VIX for 1-2 months into the future. So, it doesn’t necessarily track the VIX itself, and it doesn’t reflect longer-term thinking about volatility.

The ProShares Short VIX ETF has an expense ratio of 0.95%.

67% of retail investor accounts lose money when trading CFDs with this provider.

3. VelocityShares 1X Long VSTOXX Futures ETN (EVIX) – Trade Volatility in the STOXX 500

The VelocityShares VSTOXX Futures ETN tracks the VSTOXX index, which is essentially the European version of the VIX. Instead of tracking volatility in the S&P 500, as the VIX does, the VSTOXX tracks volatility in the European STOXX 500 index.EVIX Chart best vix etf uk

This ETN is long on VSTOXX futures contracts, meaning that the value of the fund rises when volatility rises. It tracks a mix of short-term (1-2 month) and medium-term (5-month) futures contracts for the VSTOXX.

The VelocityShares VSTOXX Futures ETN has a very expensive 1.35% expense ratio.

67% of retail investor accounts lose money when trading CFDs with this provider.

4. VelocityShares Daily Long VIX Medium-Term ETN (VIIZ) – Best Mid-Term VIX ETF

If you want to speculate on volatility not in 1-2 months’ time, but rather in 6 months’ time, you need a medium-term VIX ETF. That’s where the VelocityShares Medium-term ETN comes in handy.VIIZ Holdings best vix etf uk

This ETN invests in futures contracts for the VIX with expiration dates that are 3-6 months away. Notably, you can combine trades in the VIIZ fund with trades in a short-term volatility fund to develop a complex hedging strategy for market volatility.

The VIIZ fund has an expense ratio of 0.89%.

67% of retail investor accounts lose money when trading CFDs with this provider.

5. LHA Market State Alpha Seeker ETF (MSVX) – Best Alternative VIX ETF

The LHA Market State Alpha Seeker ETF is an interesting fund for traders and investors who want to speculate on volatility, but don’t want to buy shares of the best VIX ETFs. The fund is designed to generate returns that are completely uncorrelated with the performance of the stock market, and it does so by trading heavily in VIX ETFs.MSVX Chart best vix etf uk

In fact, the largest holding in the MSVX fund is the ProShares Short VIX Short-Term Futures ETF. That inverse VIX ETF makes up more than half the fund’s value.

Notably, the Market State Alpha Seeker ETF doesn’t require you to exit your position daily as most VIX ETFs do. Instead, you can invest for up to 3 months at a time before positions are rolled over. So, it may be a better short term investment than a VIX ETF. The fund has an expense ratio of 1.16%.

67% of retail investor accounts lose money when trading CFDs with this provider.

What are VIX ETFs?

VIX ETFs offer investors the ability to speculate on the value of the VIX. The VIX, or CBOE Volatility Index, is a measure of volatility in the S&P 500 stock market index.

The VIX is often called the market’s ‘fear gauge.’ When prices are rising steadily and there are no signs of concern among investors, the VIX falls. When selling activity spikes or options trading activity indicates that investors expect the market to drop, the VIX rises.

With a VIX or volatility ETF, you can try to profit off of changes in investors’ sentiment. However, most of the best VIX ETFs in the UK don’t track the VIX itself. Rather, they invest in derivatives like futures contracts that represent where investors think the VIX will be in the future.

So, VIX ETFs can change in value independently of the VIX. Short-term VIX ETFs like the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) track futures contracts for 1 to 2 months into the future. S&P 500 mid-term VIX futures ETFs like the VelocityShares Daily Long VIX Medium-Term ETN (VIIZ) track VIX futures contracts for 3-6 months into the future.

Are VIX ETFs a Good Investment?

VIX ETFs can be good as alternative investments, but the complexity of these financial instruments makes them suitable mainly for experienced traders. Let’s take a closer look at some of the key things you need to know when deciding whether VIX ETFs are right for you.

Daily Turnover

The biggest thing investors need to understand about VIX ETFs is that they are not suitable for long term investments. These funds are meant to be held for periods of at most one day. If you were to hold a VIX ETF for a month or even a year, you would lose money every time.

That’s because of how VIX ETFs are structured. These funds buy VIX futures contracts at the start of each day and close out positions at the end of each day. The next day, the fund resets with a new set of futures contracts.

This daily turnover ensures that the fund is accurately tracking the investor sentiment around the VIX each day. However, every time the fund resets, you would lose money as your positions are closed and then lower value positions are reopened.

So, it is essential that you only use VIX ETFs for day trading. This means that these funds are best suited to active traders rather than short or long term investors.

Expense Ratios

Another thing to note about VIX ETFs is that they tend to have very high expense ratios. The expense ratio is a fund’s management fee. The best VIX ETFs in the UK typically charge around 1% or more on an annual basis (holding the fund for a single day will cost much less).

This is important because it means that there are higher costs to trading VIX ETFs than there are to trading index funds or tracker funds.

Hedging Strategies

While it is possible to trade VIX ETFs to profit off of market volatility, many UK traders use VIX ETFs to hedge their positions. Since the VIX rises when stock prices fall, holding a VIX ETF can help keep your portfolio afloat during a stock market crash. In fact, you may want to consider adding a VIX ETF as part of a broader portfolio management strategy.

Inverse and Leveraged VIX ETFs

While most VIX ETFs simply track the value of a given set of VIX futures contracts, there are also inverse VIX ETFs and leveraged VIX ETFs.

Inverse VIX ETFs rise in value when the VIX falls and fall in value when the VIX rises. So, they are a good option for traders who believe that market volatility will remain low. Throughout market history, volatility has been low much more often than it has been high.

Leveraged VIX ETFs use options trading to increase their movements relative to the VIX. So, if VIX futures double in value, a 2x leveraged VIX ETF would quadruple in value. Leveraged ETFs can provide more profit when your trade works out, but they also dramatically increase your risk.

If you’re unsure about whether a VIX ETF is right for you, seek out professional investment advice for more information.

Best VIX ETF UK Investment Platforms 2021

In order to trade VIX ETFs in the UK, you’ll need a stock broker that offers ETF trading. To make it easier for you to get started, we’ve reviewed the 2 best UK investment platforms for trading VIX ETFs in 2021.

1. eToro – Overall Best VIX ETF Trading Platform

eToroetoro logo is our top recommendation for UK traders in search of a broker to buy VIX ETFs. This trading platform offers a variety of the best ETFs from iPath and ProShares, along with over 400 other ETFs and 2,000 global stocks.

Trading VIX ETFs with eToro is 100% commission-free. Plus, eToro allows you to buy fractional shares of ETFs, so you can trade with as little as £40. The platform does have small withdrawal and inactivity fees, but these are relatively easy to avoid.eToro ETFs

67% of retail investor accounts lose money when trading CFDs with this provider.

eToro offers excellent tools for analysing the market and choosing when to buy and sell volatility funds. To start, the broker has a custom charting and technical analysis platform for web and mobile. You get access to over 100 indicators and drawing tools, plus a news feed, economic calendar, and market sentiment gauge.eToro Mobile App

In addition, eToro has a built-in social trading network where you can monitor the activity of fellow traders and join discussions. If there’s fear building among investors, this network allows you to catch it before it becomes clear across the market. You can also copy the positions of more experienced volatility traders and keep an eye on how their buying and selling activity changes over time.eToro social trading platform

eToro is regulated by the UK Financial Conduct Authority (FCA) and all UK accounts are protected by the Financial Services Compensation Scheme. The broker offers 24/5 customer support by phone and email if you need help with your account.

Pros:

  • Trade iPath and ProShares VIX ETFs
  • 100% commission-free ETF trading
  • Buy fractional shares of the best VIX ETFs
  • Built-in social trading network
  • Regulated by the FCA

Cons:

  • Cannot trade VIX futures contracts directly
  • Small withdrawal and inactivity fees

67% of retail investor accounts lose money when trading CFDs with this provider.

2. Capital.com – Trade VIX ETFs and Futures Contracts

Capital.comCapital.com is one of the best VIX ETF trading platforms for UK traders who want flexibility. The broker offers the ability to trade popular VIX ETFs as CFDs. In addition, you can use CFD trading to speculate on the price of the VIX itself or use futures trading to buy any individual outstanding VIX futures contracts.

Trading CFDs with Capital.com is 100% commission-free and the broker offers some of the tightest spreads of any platform in the UK. In addition, Capital.com has no deposit or withdrawal fees and no inactivity fee.Capital.com VIX CFD

The broker offers a proprietary trading platform for web and mobile that has everything traders could need. You can set up custom watchlists, access dozens of technical indicators, and monitor the market with a tailored news feed. In addition, Capital.com’s mobile trading app offers price alerts so you can always stay on top of market movements.Capital.com Mobile App

Capital.com also uses artificial intelligence to enhance your trading. The broker’s platform automatically analyses your trading habits to identify what changes you can make to increase your win rate and cut the size of your losses. This can be especially for the style of active trading that VIX ETFs demand.Capital.com Trading Platform

Capital.com is regulated by the UK FCA. The broker offers exceptional 24/7 customer support. You can get in touch by phone, email, or live chat.

Pros:

  • Trade VIX ETFs, spot CFDs, and futures
  • 100% commission-free trading with low spreads
  • Mobile trading app with price alerts
  • Uses AI to improve your trading win rate
  • 24/7 customer support

Cons:

  • No price alerts on desktop app
  • ETFs traded through CFDs only

71.2% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider.

How to Buy the Best VIX ETF UK

Ready to buy one of the best VIX ETFs? We’ll show you how to start trading with eToro, which offers 100% commission-free trading, fractional shares, and a built-in social network.

Step 1: Open an eToro Account

To begin, head to eToro’s website and click Join Now to open a new account, you can also this via their investment app. You can sign up with your email or using your Facebook or Google login.Create an eToro account

67% of retail investor accounts lose money when trading CFDs with this provider.

In order to comply with UK financial regulations, eToro requires that you verify your identity before trading. Upload a photo of your driver’s license or the picture page of your passport. You’ll also need to upload a photo of a recent utility bill or bank statement that shows your address.

Step 2: Deposit Funds

Next, add funds to your new eToro trading account. You must deposit at least £160 when you open a new account. You can pay by credit card, debit card, bank transfer, PayPal, Neteller, or Skrill.Deposit funds on eToro with credit card, PayPal, e-wallet.

67% of retail investor accounts lose money when trading CFDs with this provider.

Step 3: Buy a VIX ETF

Now you’re ready to buy one of the best VIX ETFs in the UK. Search for the name of the fund you want to purchase and click Trade when it appears in the drop-down menu.

In the order form, enter the amount you want to invest in the fund. Since eToro allows you to buy fractional shares, you can invest any amount greater than £40 ($50 USD). You can choose a stop loss or take profit level to accompany your order.VIX ETFs on eToro

When you’re ready, click Open Position to buy your first VIX ETF. Remember that you’ll need to sell at the end of the trading day to avoid unnecessary losses when the fund rolls over its VIX futures contracts.

eToro – Best VIX ETF Broker with 0% Commission

With a VIX ETF, you can speculate on whether volatility in the S&P 500 is likely to rise or fall in the coming weeks and months. Trading the market’s ‘fear index’ can be complex since you need to sell your position at the end of each trading day. However, VIX ETF trading can allow you to profit when the market is falling and can be an important part of a hedging strategy.

Ready to trade the best VIX ETFs in the UK? Click the link below to get started with eToro!

etoro logo

67% of retail investor accounts lose money when trading CFDs with this provider.

FAQs

What is the VIX?

The VIX, or CBOE Volatility Index, is a benchmark index that tracks volatility in the S&P 500. The VIX is often called the stock market’s ‘fear gauge.’ The VIX rises when stock prices fall suddenly or become more volatile.

Why don’t VIX ETFs always track the VIX?

VIX ETFs invest in futures contracts that reflect where traders believe the VIX will be in several months’ time. So, VIX ETFs may not track day-to-day changes in the value of the VIX itself.

Why do VIX ETFs have negative returns?

VIX ETFs are designed to be day traded. You must exit your position at the end of each day and open a new position the next morning. Over the long term, these funds always lose money because contracts expire and new positions are opened at lower values than previous positions.

Can I short the VIX?

Yes, you can short the VIX if you believe that market volatility will drop. You can short the VIX itself using CFDs, or invest in a short VIX ETF like the ProShares Short VIX Short-Term Futures ETF (SVXY).

Are ETNs the same as ETFs?

ETNs (exchange-traded notes) are an asset class more similar to bonds than to ETFs. They are debt securities issued by banks rather than baskets of stocks or derivatives. However, like ETFs, ETNs trade on stock exchanges. ETNs typically track the value of a benchmark index like the VIX.

Can I invest in a volatility ETF through an ISA or SIPP?

You can invest in a VIX ETF with an ISA or SIPP if your plan provider offers these funds.

How can I learn more about a VIX ETF?

The best way to learn more about a VIX ETF is to read the fund’s prospectus. This is a document written by the ETF issuer that explains what’s in the fund and how it is managed.

About Michael Graw PRO INVESTOR

Michael Graw is a freelance journalist based in Bellingham, Washington. He covers finance, trading, and technology. His work has been published on numerous high-profile websites that cover the intersection of markets, global news, and emerging tech. In addition to covering financial markets, Michael’s work focuses on science, the environment, and global change. He holds a Ph.D. in Oceanography from Oregon State University and worked with environmental non-profits across the US to bridge the gap between scientific research and coastal communities. Michael’s science journalism has been featured in high-profile online publications such as Salon and Pacific Standardas well as numerous print magazines over the course of his six-year career as a writer. He has also won accolades as a photographer and videographer for his work covering communities on both coasts of the US. Other publications Michael has written for include TechRadar, Tom’s Guide, StockApps, and LearnBonds.

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