Effective July 2nd TVIX stopped trading on national exchanges (press release). The issuer, Credit Suisse (CS) halted share creations effective July 3rd but is not terminating the fund. They reserve the right to do so but don’t have to until 2030. TVIX is currently trading on OTC exchanges, e.g., OTCMarkets.com and is currently trading pretty close to its IV price, the theoretic value of the VIX futures TVIX would be holding today. TVIX Shareholders on Robinhood can sell their shares but not buy additional shares. An OTC quote on TVIX is available here: https://finance.yahoo.com/quote/TVIXF. As of 6-July-2020 Schwab and Ameritrade are still providing IV value quotes ($TVIX.IV) and (TVIX.IV) respectively.
With share creations halted TVIX’s OTC price may climb above its IV price, depending on OTC demand and the availability of TVIX shares to borrow and short to create short positions. There is definitely a floor price, close to the IV price because Credit Suisse is still redeeming (buying back) TVIX shares at the IV price. If a significant discount developed traders could make risk free profits by buying cheap TVIX shares and redeeming them with CS at the IV price.
If a premium price develops be aware it can go away in an instant if Credit Suisse decides to terminate the fund. In that case all the shareholders at that point will have their shares cashed out at a final IV price.
If you want to sell your TVIX shares contact your broker. They may be willing to close out your shares at the end-of-day IV price without going through the OTC market. For TVIX, Credit Suisse is willing to work with your broker to close out even one share lots–although the fees might be substantial.
Credit Suisse reverse split TVIX for the seventh time, December 2nd, 2019 as announced, with a 10:1 reverse split.
Reverse splits reduce transaction costs by making the bid /ask spread as a percentage of the price smaller (when TVIX is trading around $5 the one cent minimum spread TVIX’s bid / ask spread is effectively a 0.25% transaction charge). It will also likely make TVIX easier to short—a popular activity with any long volatility fund. For information about shorting long volatility funds see “Is Shorting TVIX the Perfect Trade.”
Lacking major volatility spikes, VelocityShares’ 2X leveraged short term volatility ETP needs to reverse split about every year to keep TVIX in a reasonable trading range. Without market panics, 2X long funds tend to be ravaged by contango at the rate of around 90% per year. In the past Credit Suisse has allowed TVIX to drop below $1 before implementing reverse splits, but recently that threshold has been raised to around $4/share.
After a period of reduced erosion in 2014 and 2015 TVIX’s decay rate has returned to the 90%+ per year range. The post “Monthy & Yearly Decay Rates for Long Volatility Funds” shows how decay rates have shifted over time.
|Event||Dates||Split Ratio||Inception / close price right before reverse split (split adjusted)||Months since inception /last split|
|1st Rev. Split||21-Dec-2012||10:1||0.9||24|
|2nd Rev. Split||30-Aug-2013||10:1||1.68||9|
|3rd Rev. Split||23-June-2015||10:1||0.75||22|
|4th Rev. Split||9-August-2016||25:1||0.92||14|
|5th Rev. Split||16-March-2017||10:1||3.84||8|
|6th Rev. Split||8-June 2018||10:1||4.32||17|
|7th Rev. Split||2-Dec-2019||10:1||6.87||17|
If you hold shares of TVIX before a reverse split there isn’t anything to worry about. The value of your investment stays the same through the reverse split process. You just have 10X fewer shares that are worth 10X more each. If your shareholdings are not a multiple of 10, say 43 shares, you will get 4 reverse adjusted shares and a cash payout for the 3 remaining pre-split shares.
If you are short TVIX, same story, no material impact.
Updated Dec 17, 2019
For more on TVIX see: