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15 Most Volatile ETFs

Sumit Roy

With one month in the books, 2016 is shaping up to be a tumultuous year for stocks. Whether the market ultimately rebounds later in the year or falls even further, the only thing that seems certain is there are more big moves to come.

Implied Volatility Slightly Elevated

Investors typically describe large fluctuations in the stock market as volatility. The widely followed CBOE Volatility Index (VIX) attempts to measure expected volatility based on the pricing of S&P 500 options. When investors are willing to pay more for options, they expect larger moves in the market (and vice versa). This is called "implied volatility."

Currently, the VIX is trading around the 22 level after briefly spiking above 30 in January. The VIX is an annualized figure; thus, based on where the volatility index is trading right now, traders expect the S&P 500 to move 22% up or down in the next year.

That's a bit above the long-term average of 19.8 for the VIX.

CBOE Volatility Index

Of course, the volatility that the VIX implies and how volatile the market turns out to be are two different things.

Actual Volatility On The Rise
Historical volatility, or how volatile the market actually has been, is something that is measured based on the movements in a stock index.

Investors often use standard deviation, a statistical measure of how much the market deviates from its average return, to calculate historical volatility.

In January, stocks were particularly volatile based on this measure, with a reading of 25 for the SPDR S&P 500 ETF (SPY | A-98).

Even on a longer-term basis, the market's volatility is picking up. The rolling one-year volatility for SPY is 16.6, the highest level since October 2012.

Rolling 1-Month & 1-Year Volatility For SPY

SPY's Volatility: Middle Of The Pack

This isn't surprising; everyone is well aware of the big moves that the broad market has been seeing due to a host of concerns related to oil, China and earnings.

But as volatile as SPY has been, its moves can be considered downright tame compared with the moves in other ETFs. As an ETF holding large-cap stocks, SPY is essentially in the middle of the pack when it comes to ETF volatility.


The Most Volatile ETP
For example, take the iPath Bloomberg Natural Gas Subindex Total Return ETN (GAZ | F-65). It's been the most volatile of all nonleveraged/noninverse exchange-traded products during the past year, with an eye-popping one-year volatility reading of 85.9.

In addition to the wild (mostly downward) swings that natural gas has seen, GAZ has been closed for creations for some time now, essentially making it a broken exchange-traded note. Issuer Barclays recently warned that GAZ could hit $0 if natural gas prices continue to fall.

Another natural gas fund, the First Trust ISE-Revere Natural Gas ETF (FCG | B-95), has also been among the most volatile ETFs of the past year. FCG holds an equal-weighted basket of struggling natural gas equities.


Commodity & China ETFs Among Most Volatile ETFs

Unsurprisingly, the 15 most volatile ETFs are all clustered in the problem areas of the market: China, energy and commodities in general.


The Market Vectors ChinaAMC SME-ChiNext ETF (CNXT | D-50)―2015's best-performing ETF and now one of 2016's worst―is the second-most volatile ETF in the past year, starkly illustrating that risk and reward go hand in hand.

A total of six energy ETPs and six China ETPs made the list. A few others from different areas, such as the Global X FTSE Greece 20 ETF (GREK | D-63) and the iPath S&P 500 VIX Short-Term Futures ETN (VXX | B-47), are also among the top 15 most volatile ETFs.

See the table below for the complete list:

Top 15 Most Volatile ETFs


Contact Sumit Roy at sroy@etf.com.

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