ETF Battles: It's a Volatility Income Showdown - SVOL vs. ZVOL!
There are ETFs that allow you to play on stock market volatility directionally, up or down. But what about ETFs that aim to capitalize on the income potential from volatility? That sounds juicy, 40% distribution rates. Sure, why not? What besides nothing could possibly go wrong?
Coming up on today's program, we've got an audience requested ETF battle, this time between volatility income funds with yields to the moon from simplifying volatility shares. Stick around. Welcome to all. You're watching ETF Battles. I'm Ronda Ley. This is season 6 and I hope everyone's doing well.
If there's an ETF battle you'd like to see, please send me your ETF ticker symbols in the comment section below. We could do double, triple, and quadruple headers, so make it good. Also, visit the description section. I've got links to our program judges. Get in touch. I've also got a link to our program sponsor, Direction, and be sure to visit direction.com. Check out their growing lineup of ETFs, which include single stock funds linked to MAG 7 companies like Tesla and Nvidia. Learn more at direction.com.
Now, we've also got one more resource for you, ETFK Retire. Yes, you heard right, ETFs and 401k plans. That's our solution. So, again, you'll find that and more in the description section below. So, today's audience requested ETF battle is from a viewer named Minas and it's between SVAL and ZVL. These are volatility income ETFs from Simplify and Volatility Shares.
Judging today's volatility contest, we've got a duo extraordinaire. We've got Aan Ferris with Bloomberg and Mike Akens with ETF Action. Guys, great to see you. Hey guys, nice seeing you. Great to be here. We're going to blaze through our four battle categories, giving each of our judges an opportunity to give us their preferred choice. For our mystery category, our judges can choose a single factor or multiple factors that they feel are pertinent to today's matchup. Our judges can also nominate wildcard ETFs if they think there's something better elsewhere.
Keep in mind, none of the battle outcomes are ever known in advance by myself or our judges, nor are they ever predetermined. So, let's kick things off with the first category, cost. Mike, please get us started. Awesome. Well, it's good to be here, Ron. Thanks for having me. On the cost side of things for these two products, they're both expensive in ETF world. SVL comes in at 72 bips, 142 bips on ZVL. So on the cover of things, SVL is the cheaper of the two products, but they're both well, they're both selling volatility to create income.
They're doing it in varying degrees of risk. So your expense ratio on this whole game is not going to be a big component in your determination on which one of these two products you want to use. But just on pure cost basis, you know, assuming liquidity is very similar between the two, SVL does come in considerably cheaper at that 72 basis points. All right, got you down for ESV. Thank you, Mike. Ethan, you're up next. How do you see it when it comes to cost? Hey, guys. No, that was great. Yeah, like Mike alluded to, they're not cheap overall by the grant, you know, by overall standards. 142 basis points for ZVL, 72, still high, but that's half of ZVL.
SVAL has also been around a lot longer. It's got more in assets. It's almost close to a billion, which is really impressive for something like this. It trades a lot more. So, I think the spread's a little bit tighter there. So, I think this is a pretty clear winner that SVAL is the overall total cost cheaper. So, I'll give that one to ESV. Exposure strategy is the next category. This is where we take a look at the underlying fund strategy. And so, break it down for us, Aan. How do these two ETFs compare?
Yeah, Mike was sort of alluding to it. So the main thing is it's for investors looking for different types of yield however we're getting and this is a big thing in the ETF industry now. So essentially they're just selling V but to different degrees and if you remember back in the day there was like XIV the product's not around anymore but this is what how this trade got really popular. So SVAL is a little the yield it's a little bit lower meaning that it's not doing a one for one inverse of the VIX. It's doing anywhere from only 25 to 30% of it. So, it'll be a little bit less volatile.
It's also using options to kind of mitigate that volatility. SVAL is a minus one of the midterm VIX. So, there's different structures, right? There's really short-term, there's midterm, and long-term. This is just sort of targeting the middle. I think one of the reason for that was the XIV issue is what the really short-term ones. It tends to be very volatile than the middle of the curve. So, it wanted to sort of mitigate that. So you're going they're just targeting the middle of the curve. So it's just a little bit different strategies.
You're going to get a lot more juice in SV just because it's not using any options any other kind of like V mitigating strategies. You know it's a tough one. I think if you want the most pop you're going to have to get ZV cuz these are but for someone looking for more steady income, a little bit less volatility, SV is probably your winner. And just for that, I'm probably going to give it I'm going to give this one to ESph just cuz I think it's a little bit more of a predictable return path compared not to compared to like stocks or something, but just between the two, it's a little bit more predictable. And so I think you have less of an issue of any sort of outsized event. So I will give this one to the simplified product as follow. Solid takes. Thank you, Aan. Mike, you're up next. How do you see it when it comes to exposure strategy?
Yeah. So on the strategy front, I think Aon did an excellent job explaining the nuances between the two products. Essentially, you get the full inverse with ZVL, meaning inverse VEX or VIX proportionally a full inverse. Which in result gives you a heck of a lot more volatility, which is why it's going to kick off a much larger income stream by selling that volatility and collecting that premium.
Whereas Esol tries to take away a little bit of that volatility by dialing it back to that 20 to 30% range. And to that extent they're both going to have moments of shock, right? So just recently on Liberation Day, both these products when the VIX popped up, they both got smoked pretty well, but ESV got smoked about 25% or you know relative to the to the ZAL. So the selling volatility is not new.
I think you need to know what you're doing and you need to understand that, hey, I'm gonna pick a pre I'm gonna pick up this premium for long periods of time, but then from time to time, I'm going to have to restart and I expect to lose a significant portion of that asset. It's a very disciplined game. To that extent, if this is something you're looking to utilize inside of a portfolio for some uncorrelated income generation, whatever it may be, I think ESV is better suited just because of you you still can get very it can be still be very volatile. But relative to ZAL, it's not not even on the same page. It's it's one quarter. So it's a big difference on that front.
You know, one thing I would say and just generally, a lot of times people say you're selling V, you're picking up pennies in front of a steamroller. Just keep that in mind on these strategies. Great analogy. We don't want to be steamrolled for picking up pennies, but it is it is worth noting that could happen like you said in really crazy. Yeah. Yeah, it will happen. Exactly. in in especially in periods of extended volatility, you know, not just those spikes that we always get every now and then, but also what about sustained periods of high volatility that could spell trouble. That takes us next to performance and yield. And Mike, you sort of alluded to this, so please elaborate.
Yeah. So performance on this front, I mean the strategy in of itself is always going to get reset at some point when you have an event whether it's COVID or whether it's liberation day or whether it's whatever causes the market to have a spike in volatility of all spike you're going to have a reset in your return. So you're thinking about it, you know, really from a standpoint of how much risk, how much of how big of a reset am I willing to take to pick up income in the meantime. So obviously ZAL is kicking off about four times the amount of income that you're seeing in ESV which is still kicking off a lot of income. You know 12 13% versus 40 plus percent in ZAL. So the yield obviously you're going to get more with ZAL. But you're also going to have much larger draw downs when those V spikes happen.
So it's literally it's up to you as the investor. You know what what can you stomach? How disciplined are you to sticking to the strategy? Again, I think that the odds are more people are going to be have be able to stick with ESphall. And from that perspective, I'm just going to continue to give the win here to ESV. From a standard use case. Now, if you're really into this and you understand how you're using it, if you have a hedge on the other side of it, you know, there could be a reason to go a little bit further. But you really need to know what you're doing. Ethan, you're up next. How do you see it when it comes to performance and yield? Yeah, that was great. And this is where it gets kind of complicated because the yield on ZAL is 40% 41 and it's about 17 on asphalt. That's a big difference, right? It's enough to get someone thinking like do I want to buy ZVAL and handle and you know be exposed to more of the volatility, more of the draw downs and even just on a total performance basis, ZVA has done better and kind of like Mike was alluding to, this is going to work until it doesn't, right?
