10-Q: Dynamic Shares Trust Reports Positive NAV Increase for Dynamic Short Short-Term Volatility Futures ETF in Q1 2024

Dynamic Shares Trust's Dynamic Short Short-Term Volatility Futures ETF saw a 5.55% increase in per share NAV during the first quarter of 2024, driven by lower market volatility and a decrease in VIX futures prices.

Summary

• Dynamic Shares Trust reported a 5.55% increase in per share Net Asset Value (NAV) for its Dynamic Short Short-Term Volatility Futures ETF during the first quarter of 2024.
• The NAV per share increased from $27.77 at the beginning of the period to $29.31 at the end.
• The increase was attributed to lower market volatility and a decrease in the 30-day weighted average VIX futures price.
• The Fund's net assets increased from $6,942,895 to $7,328,788 during the quarter.
• Net investment income was $34,607, compared to $20,839 for the same period in 2023.
• Net realized gain was $356,489, compared to $99,234 for the same period in 2023.
• The fund maintains short positions in VIX futures contracts, aiming for a notional exposure ranging from -0.1 to -0.5.
• The fund's management fee is 1.85% per annum of its average daily net assets.
• The fund had 250,005 shares outstanding at the end of the period, unchanged from the beginning of the period.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with increased NAV and net investment income. However, the inherent risks associated with inverse volatility ETFs and the potential for significant losses temper the overall sentiment.

Positives

• The fund experienced a positive increase in NAV and net assets.
• Net investment income and net realized gains increased compared to the same period last year.
• The fund's strategy benefited from lower market volatility and decreasing VIX futures prices.

Negatives

• The fund's performance is subject to the compounding effect of inverse returns, which can impact long-term results.
• The fund is exposed to risks associated with VIX futures contracts, which are not based on a tradable reference asset.
• The fund's strategy involves leverage, which can magnify losses.

Risks

• The fund's performance is subject to correlation and compounding risks, which can cause returns to differ from the benchmark over longer periods.
• The fund is exposed to counterparty risk when entering into futures contracts.
• The fund's use of leverage can magnify losses.
• The fund is subject to liquidity risk, as some investments may be less liquid than others.
• The fund is exposed to contango and backwardation risk, which can impact performance when rolling futures contracts.
• Natural disasters and epidemics, such as COVID-19, can disrupt markets and negatively impact the fund's performance.
• Global economic shocks, such as the war in Ukraine, can increase market uncertainty and impact the fund's investments.
• The fund's inverse exposure to VIX futures contracts means that shareholders will lose money when the values of the VIX Futures Contracts rise, and a single day or intraday increase in the level of the VIX Futures Contracts approaching 200% could result in the total loss or almost total loss of an investor's investment.

Future Outlook

The report contains forward-looking statements regarding future business and financial performance, anticipated sales growth, competition, expenses, gross margins, profits or losses, new product introductions, financing, and working capital requirements. These statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied.

Industry Context

This announcement is relevant to the exchange-traded fund (ETF) industry, particularly those funds focused on volatility and VIX futures. The performance of the fund is directly tied to market volatility and the pricing of VIX futures contracts, making it sensitive to broader economic and market conditions.

Comparison to Industry Standards

• It's difficult to compare this fund directly to industry standards without knowing the specific benchmark it aims to inversely track.
• However, similar volatility-linked ETFs include products from ProShares and VelocityShares.
• The management fee of 1.85% is relatively high compared to some other ETFs, but it's important to consider the complexity of managing a short volatility strategy.
• The fund's performance should be evaluated against its stated objective and the performance of similar funds with comparable strategies.

Stakeholder Impact

• Shareholders experienced a positive return on their investment during the quarter.
• The fund's performance impacts Authorized Participants who create and redeem Creation Units.
• The fund's sponsor, Dynamic Shares LLC, benefits from the management fee.

Key Dates

Keywords

Volatility, VIX Futures, Inverse ETF, Short-Term, Dynamic Shares, ETF, Futures Contracts, NAV