Currently TVIX is running about 5% high compared to its indicative value. The combination of Credit Suisse making shares available to borrow, plus the knowledge that limited share creation might start on March 28th was enough to restore relative sanity to TVIX’s price. As you can see below it didn’t take a lot of new shares to pull TVIX back close to its indicative value. …
Wednesday night, March 21, 2012, I was wondering if there was a graceful way for Credit Suisse to restore TVIX to working order and get its share creation process working again. The Wednesday close was $14.43, roughly 2X the $7.62 indicative value (IV) giving a market capitalization of $587 Million. The correct market cap, based on the indicative value was $310 Million. Somehow $277 …
March 9th marked the 3 year anniversary of the current bull market. The S&P 500 has scored an impressive 110% run-up, and I think we can officially declare that the dreaded double dip recession didn’t happen. However for the buy and hold investor there isn’t a lot to celebrate. We are still 16% below the S&P 500’s 2007 peak. Not including dividends a January 1, …
If things weren’t derivative enough for you before, you can add one more level of indirection to your volatility investments. Options are available on ProShares‘ 1.5X VIX short-term UVXY and their -0.5X inverse short-term SVXY. These options are similar to VXX’s options; they are American exercise style and expire on the same day as equity options. VIX options are European exercise and expire on the same …
At one point I was hazy about the internal workings of leveraged and inverse ETFs, so I constructed models of hypothetical 2X and -1X Apple ETFs to clarify my understanding. I ignored a whole host of issues (e.g., regulatory, cost-effective leverage), but even a simple model of a leveraged ETF can hurt your brain. The basic inverse and leverage mechanisms shown below are essentially the same for …
