10-Q/A: Dynamic Shares Trust Amends Quarterly Report to Include Trust-Level Financials

Dynamic Shares Trust files an amendment to its Q2 2023 report to include combined financial information for the Trust and its Dynamic Short Short-Term Volatility Futures ETF.

Summary

• Dynamic Shares Trust has amended its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.
• The amendment includes the combined financial information for the Trust, in addition to the Dynamic Short Short-Term Volatility Futures ETF.
• The original report included financial information only for the Dynamic Short Short-Term Volatility Futures ETF.
• The amendment does not update or discuss any developments after the date of the original report.
• As of August 11, 2023, the registrant had 150,005 shares outstanding.
• The Fund seeks to achieve its investment objective, under normal circumstances, by obtaining investment exposure to an actively managed portfolio of short positions in VIX Futures Contracts, which are based on the CBOE VIX Index.
• The Fund expects that the notional exposure of its portfolio of short positions in VIX Futures Contracts will range from -0.1 to -0.5 under normal circumstances.
• The Fund expects to primarily take short positions in VIX Futures Contracts by shorting the next two near term VIX Futures Contracts and rolling the nearest month VIX Futures Contract to the next month on a daily basis.
• As such, the Fund expects to have a constant one-month rolling short position in first and second month VIX Futures Contracts under normal circumstances.

Sentiment

Score: 6

Explanation: The sentiment is neutral. The document is primarily a factual report of financial results and an amendment for compliance purposes. While there are both positive and negative performance aspects mentioned, the overall tone is objective and focused on providing information.

Positives

• The Fund's per share NAV increased by 26.52% for the three months ended June 30, 2023, due in part to lower market volatility and the decrease in the 30 day weighted average VIX futures price over the period.

Negatives

• The Fund's per share NAV decreased by 19.01% for the three months ended June 30, 2022, due in part to the increase in the 30 day weighted average VIX futures prices over the period.

Risks

• The Fund is subject to correlation and compounding risk, which can cause the Fund's performance to differ from its stated multiple times the return of its benchmark.
• The Fund is exposed to counterparty risk, which is the risk that a counterparty to a contract will not meet its obligations.
• The Fund is subject to leverage risk, which can magnify losses on investments.
• The Fund is subject to liquidity risk, which is the risk that the Fund may not be able to sell its investments quickly or at a fair price.
• The Fund is subject to contango and backwardation risk, which can affect the Fund's performance when rolling futures contracts.
• Natural disasters and epidemics can be highly disruptive to economies and markets and can lead to increased market volatility and significant market losses.
• The Russian Federation's invasion of Ukraine has resulted in an increased level of global economic and political uncertainty.

Future Outlook

The Fund seeks daily investment results, before fees and expenses, which correspond to a multiple, the inverse or an inverse multiple of the daily performance, of its corresponding benchmark. The Fund does not seek to achieve these stated investment objectives over a period of time greater than a single day because mathematical compounding prevents the Fund from achieving such results.

Management Comments

• We wish to clarify for our investors and stakeholders that, due to the structure of our organization, these registrant level financial statements are identical to the fund level financial statements of our sole fund, the Dynamic Short Short-Term Volatility Futures ETF.
• It is important to note that the inclusion of these registrant level financial statements does not reflect any changes in the financial condition, results of operations, or cash flows of the Trust or the Fund from those previously reported.
• We remain committed to maintaining the highest standards of financial reporting and transparency.

Industry Context

This report provides insight into the performance and risk management of a volatility-based ETF, which is relevant to investors and industry participants interested in alternative investment strategies and market volatility.

Comparison to Industry Standards

• The fund's strategy of shorting VIX futures is a common approach for inverse volatility ETFs, with competitors including ProShares Short VIX Short-Term Futures ETF (SVXY) and VelocityShares Daily Inverse VIX Short-Term ETN (XIV) prior to its delisting.
• The management fee of 1.85% is relatively high compared to some other ETFs, but may be justified by the active management and specialized strategy.
• The fund's performance is highly dependent on the VIX futures curve and market volatility, making it difficult to directly compare to traditional equity or fixed income benchmarks.

Stakeholder Impact

• The amendment provides more comprehensive financial information to shareholders.
• The report details the risks associated with the Fund's investment strategy, which is important for shareholders to understand.
• The Fund's performance impacts shareholder returns.

Key Dates

Keywords

Volatility Futures, Dynamic Shares Trust, VIX Futures, ETF, Amendment, Financial Report