Hi all,
the current mVIXY is a futures-based ETF, the fund must buy more expensive longer-dated VIX futures contracts while selling cheaper short-dated ones to roll its position, effectively buying high and selling low. Over time, this creates downward pressure on the ETF’s price, cause it has a poor correlation with the real VIX index, and long-term holders always lose money, it’s unreasonable to choose this as a mirrored underlying asset.
Instead, we should choose the VIX continuous future index (the ticker usually called VX.1!) as the underlying asset to track real S&P volatility.
The interesting thing is people can’t really buy this index in the traditional market for this index refers to the nearest expiration date VIX future contract, there is always rolling fees and position holding fees in CBOE futures market if anybody wanna keep up with the index, but in the synthetic asset world, we can creat an mVIX token to track the index, while people can always arbitrage when price mismatch between the index an mVIX, it’s better than track the VIX index itself for the index is not tradeable.
Also, it may attract those real large professional investors who desperately needs a low-cost way to hedge market volatility.
VIX ETF is one of the most ‘expensive’ financial product, we can also create many more mAssets which links to the continuous futures, like oil, gas, etc. basically all commodities, these mAssets don’t have rolling and holding and managing fees like commodity ETFs, will be better for investors to hold.
, I dont think there must be a funding rate mechanism like CEX’s perpetual contract, because just like normal mAssets don’t have a strong reward and punishment mechanism for users to balance the supply and demand of the mAsset, traders works more by consensus to eliminate price deviations.
Well I guess the one things to stress again is the VIX is not an asset and synthetics track assets. So you tracking a non-asset based on Orcale that would have conflict by making it assets because Arb does exist and as mentioned, those that mint and buy the synthetic would bid it over VIX value to compensate for real market conditions. Understand that everyone would be right, less the cost for time value of money by holding VIX with no drag or futures convexity, as if held in a vacuum that real markets don’t allow for, meaning eventually the perpetual would settle at a market price similar to a complex market force of far dated VX futures.