XIV sets a new volume record

XIV, VelocityShares’ daily inverse volatility fund traded over 660 thousand shares Monday, surpassing its previous record of almost 550 thousand set on March 16th.   It is showing an interesting volume pattern, with most days having under 100 thousand shares trading, and then surging when the market has big drops.  Look at the difference between Friday’s volume and Monday’s:

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I like buying XIV on a day like Monday, market opening down on bad but probably transitory news (S&P negative trend on USA credit rating)—where  the chances of a bounce are pretty high.  If I’m right I can make a nice profit for the day, and if I’m wrong I don’t mind holding on to XIV, unlike its evil twin, VXX.

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It looks like VelocityShares has at least two winners with XIV, and its 2X long volatility offering TVIX—which set its own volume record today with over 2 million shares traded.  I’m thinking Barclays will need to respond to TVIX, offering its own 2X long.

Responding to XIV’s growth will be tougher for Barclays because they already have two inverse volatility ETNs: XXV, IVO.   These funds mimic short positions in VVX  rather than the inverse daily move that XIV strives for.  They appear to perform at least as well as XIV when first introduced at around $20/share, but lose their punch as their prices approach $30.  See here for more information.

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