Certain things fascinate me including whether a tail risk ETF will ever solve the dilemma of bleeding away as put options expire worthless and the fund then buys more. Going long the VIX is another way to put on the exposure in theory but is very difficult to execute on with the failed Simplify Tail Risk ETF (CYA) as an example.
In a recent post we looked at the filed for Tuttle Capital No Bleed Tail Risk ETF(OHNO) which will have several different strategies under the hood if it lists. I have no idea if OHNO will work the way prospective holder would hope for but I am intrigued.
We've also looked the Alpha Architect Tail Risk ETF (CAOS) which is a tough one to figure out. YTD has been a good test for a lot of things.
CAOS is the flat blue line, the S&P 500 in pink and the Cambria Tail Risk ETF (TAIL) is the green line. YTD, in a rough market, TAIL is probably doing what holders would hope for. Part of the tail wind is the lift from longer dated treasuries which are up a little this year. In 2022 the long term treasury exposure was a serious drag. Despite the drop in markets, TAIL was down 13% that year because longer bonds got hit very hard.
CAOS has been pretty reliable as a horizontal line with a slight upward tilt but I would not describe the return as being meaningfully sensitive to the decline in the broad market. It did react to the dip last August but not this one. In one post about CAOS, months ago, I suggested it could be a horizontal line that might offer some protection and maybe that's how it is turning out.
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