Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

TVIX Premium to Indicative Value Creeping Back Up…

Mon, Apr 2, 7:12 PM ET, by Bill Luby

If you thought the TVIX (VelocityShares Daily 2x VIX Short-Term ETN) story was behind us, you might want to think again.

No, I am not talking about the recent news that FINRA is "looking at the events and trading" associated with TVIX and more generally that the regulator has "a review under way looking at a host of issues relating to ETNs and other complex products."

Instead, my interest is in the return of some meaningful premium in TVIX relative to its Intraday Indicative Value (a real-time estimate of an ETP's fair value, based on the most recent prices of its underlying securities) during the last three days.

For some historical perspective, consider that in the months prior to Credit Suisse (CS) suspending creation units on February 21, TVIX typically traded at a premium of about 0.5% above its indicative value. After the creation units were suspended, the premium vacillated wildly (as seen in the graphic below), though for several weeks the premium was locked in a relatively narrow range of 10-20%. That premium over indicative value spiked to 89% on the day before the announcement that Credit Suisse was resuming creation units. Once that resumption of creation units was announced, the premium in TVIX fell all the way back to 2% in just three days, no doubt signaling to many that it would soon be business as usual in TVIX trading.

During the last three days, however, the TVIX premium is has remained largely in the 10-15% range, ending today at 11.4%.

The knee-jerk conclusion here is that there Credit Suisse may be considering the possibility of suspending the TVIX creation units once again. Another interpretation is that while Credit Suisse indicated they would reopen issuance of TVIX "on a limited basis," it is now likely that the limited flow of TVIX creations units has not been sufficient to establish a price equivalence between TVIX and TVIX.IV, suggesting that an imbalance of supply and demand is persisting. Given the low trading volumes for the last three days, I am inclined to believe the that imbalance is more of an issue of supply constrains than one of excess demand, but here the simple interpretation of the data may not be the proper explanation.

The fluctuations in the TVIX premium will be very interesting to watch going forward. One could argue that in spite of my many posts on TVIX, including a (pre-suspension) reminder that the pricing supplement to the prospectus states in no uncertain terms, "The long term expected value of your ETNs is zero," many investors had no idea what they were buying when they purchased shares of TVIX. In the six weeks since creation units were suspended, the public has had a reasonably thorough if sometimes painful education on the matter, even if some of this has come too late to avoid large losses.

Can this wiser and better educated investor class help to create another huge spike in TVIX premium? I have my doubts, but will certainly be watching in earnest. Remember that anyone who pays a 11% premium over fair value for TVIX should anticipate that the premium will evaporate sometime in the near future and that any short-terms gains will likely have to come in the form of other investors who are willing to pay an even larger premium to own an ETN that is likely to underperform UVXY if the VIX does spike.

As an editorial aside, while TVIX may be taking it on the chin in terms of publicity, had this product been launched prior to the 2008 financial crisis, I have little doubt that many investors would have been genuflecting in front of it during the terror that gripped the stock market during its transition to a post-Lehman world.

Related posts:

[source(s): thinkorswim/TD Ameritrade, Yahoo]

Disclosure(s): short TVIX and UVXY at time of writing



SDI Glossary: "Day Trading" Definition
SDI Glossary: "price" Definition
SDI Glossary: "Exchange" Definition
SDI Glossary: "Futures" Definition
SDI Glossary: "NRA" Definition
SDI Glossary: "Option" Definition
SDI Glossary: "Short" Definition
SDI Glossary: "VIX" Definition
SDI Glossary: "Volume" Definition
This Article's Word Cloud:   After   Creation   Credit   ETNs   Highest   Suisse   TVIX   Trading   UVXY   Units   Volume   What   about   been   come   creation   days   demand   during   fair   have   here   imbalance   interpretation   investors   last   likely   many   over   posts   premium   recent   short   some   supply   suspended   terms   that   they   this   three   time   trading   units   value   weeks   were   while   will   would

| More

Video: John vs The Machines (Carter Takes on HFT)
Tue, Apr 22, 3:11 PM ET, by Corey Rosenbloom

John Carter’s at it again with an entertaining yet educational new video about the world ...

April 22 Breakout Trend Day Breadth Update and Stock Scan
Tue, Apr 22, 1:11 PM ET, by Corey Rosenbloom

With price breaking through resistance and defying divergences, let’s take a look at Sector Breadth ...

Are We Really Repeating this SP500 Pattern Again?
Tue, Apr 22, 10:11 AM ET, by Corey Rosenbloom

Could we be caught in the Twilight Zone again and doomed to repeat the same ...

April 21 Range Reference and Market Internals Update for SP500
Mon, Apr 21, 1:41 PM ET, by Corey Rosenbloom

What message are the Big Three Market Internals sending us as we challenge an upper ...

Planning an April Pivot Trade for Biogen BIIB
Mon, Apr 21, 11:51 AM ET, by Corey Rosenbloom

Biogen (BIIB) is setting up an inflection or “Pivot Trade” that we can study as ...

April 17th Utilities Collapse Intraday Breadth Update and Stock Scan
Thu, Apr 17, 1:31 PM ET, by Corey Rosenbloom

What a difference a day makes! In yesterday’s mid-day update, I highlighted a broader bullish ...

Utilities and Stocks Breaking to New 52 Week Highs
Wed, Apr 16, 7:11 PM ET, by Corey Rosenbloom

Sometimes the simplest things are effective for finding candidates to trade on a short-term or ...

April 16 Bullish Sector Breadth and Trending Stocks
Wed, Apr 16, 2:21 PM ET, by Corey Rosenbloom

We finally have broad bullish sector breadth for today’s bullish bounce session. Let’s take a ...

The Correction As Seen in the ETP Landscape
Tue, Apr 15, 3:11 PM ET, by Bill Luby

Since stocks bottomed in March 2009, I have periodically been publishing an SPX pullback table ...

Tax Day Bearish Sector Breadth and Stock Scan
Tue, Apr 15, 2:11 PM ET, by Corey Rosenbloom

April 15th brings a lunar eclipse (blood moon) and “tax day.” Putting those things behind ...

Seven New 52 Week Highs and One New Low for April 14
Mon, Apr 14, 2:21 PM ET, by Corey Rosenbloom

Following-up on this morning’s intraday Breadth and Trending Stock Scan update, let’s take a quick ...

Bullish Sector Breadth with Caution and Trending Stock Scan for April 14
Mon, Apr 14, 1:21 PM ET, by Corey Rosenbloom

While the broader US Stock Market rallies sharply off an inflection low today, the Sector ...

April 11 Breakdown Sector Breadth and Trending Update
Fri, Apr 11, 1:41 PM ET, by Corey Rosenbloom

With the broader market breaking a key support level this morning, let’s take a quick ...

Essential April Fibonacci Retracement Levels for Dow NASDAQ and SPX
Fri, Apr 11, 12:41 PM ET, by Corey Rosenbloom

With the US Equity Markets correcting lower against recent highs, let’s take a moment to ...

April 10 Another Collapsing Breadth and Downtrending Stock Update
Thu, Apr 10, 1:31 PM ET, by Corey Rosenbloom

We’re seeing another sharp rotation of money flow out of stocks as seen by price ...

Gaps and Traps with Breaks and Fakes for ISRG
Wed, Apr 9, 3:51 PM ET, by Corey Rosenbloom

Intuitive Surgical (ISRG) is the weakest performing stock today (largest percentage loser) in the S&P ...

Tricks and Traps with Breaks and Fakes for ISRG
Wed, Apr 9, 3:31 PM ET, by Corey Rosenbloom

Intuitive Surgical (ISRG) is the weakest performing stock today (largest percentage loser) in the S&P ...

Bounce Continues for April 9 Sector Breadth and Trending Stock Update
Wed, Apr 9, 1:31 PM ET, by Corey Rosenbloom

Well that was a relief! Price continued to rally up off the key support level ...

April 8 Reversal Sector Breadth and Trending Stock Scan
Tue, Apr 8, 1:21 PM ET, by Corey Rosenbloom

With a sudden reversal off expected support in the S&P 500, let’s dig a little ...

Traps Trendlines and Current Reference Levels for US Equity Futures
Tue, Apr 8, 11:31 AM ET, by Corey Rosenbloom

After a Bull Trap outcome sent equity prices back to the lower support boundary, let’s ...

Study Lesson on Lengthy Market Internal Divergences and Snapbacks
Mon, Apr 7, 2:41 PM ET, by Corey Rosenbloom

Students of Market Internals know that Friday’s and Monday’s sharp downside reversal in the US ...

April 7 Collapsing Sector Breadth and Intraday Trending Stocks Scan
Mon, Apr 7, 1:31 PM ET, by Corey Rosenbloom

At the halfway point of an extended sell-off in the Stock Market, what message does ...

April 4th Reversal Day Breadth and Trending Stocks
Fri, Apr 4, 1:41 PM ET, by Corey Rosenbloom

What a day this has been so far! Let’s get right to our intraday Sector ...

Quick Charting April Market Internals at the Highs
Wed, Apr 2, 3:21 PM ET, by Corey Rosenbloom

While the S&P 500 is breaking again to all-time highs in today’s session, let’s peek ...

April 2 Midday Stock Market Breadth and Trend Update
Wed, Apr 2, 2:11 PM ET, by Corey Rosenbloom

With the trading day more than halfway complete, let’s take a look at the top ...

April Pullback Retracement Play in Facebook FB
Tue, Apr 1, 3:11 PM ET, by Corey Rosenbloom

Facebook (FB) shares face a major “make or break” support challenge at a key opportunity ...

March 31 Intraday Sector Breadth and Trending Stock Scan
Mon, Mar 31, 1:21 PM ET, by Corey Rosenbloom

What does “Sector Breadth” reveal about today’s session (and which sector should we be avoiding ...

Quick SP500 Trend and Range Surfing Update
Mon, Mar 31, 1:11 PM ET, by Corey Rosenbloom

As we end March and the first quarter 2014, let’s take a quick look at ...

CBOE RMC 2014: A Retrospective
Mon, Mar 31, 8:11 AM ET, by Bill Luby

Earlier this month, I had the pleasure of attending the CBOE Risk Management Conference (RMC) ...

The Turnaround in Emerging Markets and VXEEM
Sun, Mar 30, 8:11 AM ET, by Bill Luby

While I have a long way to go before I become the next Manny Mota, ...

Three Aggressive Reversal Plays from Consecutive Down Days
Fri, Mar 28, 3:51 PM ET, by Corey Rosenbloom

As we end the week, let’s look at three stocks that top the “Most Consecutive ...

Key Support Pivot Forming in Amazon AMZN
Thu, Mar 27, 3:41 PM ET, by Corey Rosenbloom

Amazon.com (AMZN) shares hit a confluence support target today, as I highlighted originally in the ...

Key Inflection Planning Level for SP500 Topping Pattern
Thu, Mar 27, 3:11 PM ET, by Corey Rosenbloom

The S&P 500 continues to play out the “Repeat Topping Pattern” scenario I mentioned to ...

Intraday Sector Breadth and Trending Stock Update for March 26
Wed, Mar 26, 2:11 PM ET, by Corey Rosenbloom

With a strong mid-day downside reversal, let’s update our current Sector Breadth Chart (the message ...

Focusing on Key Support and an Open Air Pocket for Netflix NFLX
Tue, Mar 25, 1:11 PM ET, by Corey Rosenbloom

A quick glance at the Daily Chart of Netflix (NFLX) shows a critical support-test happening ...

Simple Repeating Top Pattern in the SP500
Mon, Mar 24, 12:41 PM ET, by Corey Rosenbloom

Is the market topping or is this just another in a string of smaller “repeat ...

Bearish Signals from the Sector Performance Grid in March
Mon, Mar 24, 10:51 AM ET, by Corey Rosenbloom

With the S&P 500 tipping to a weak all-time high Friday, what does the Sector ...

March 21 Intraday Sector Breadth and Trending Stocks
Fri, Mar 21, 1:51 PM ET, by Corey Rosenbloom

What is Sector Breadth revealing about the health of today’s rally, and which stocks are ...

March 20 Intraday Sector Breadth and Trending Stocks
Fri, Mar 21, 1:31 PM ET, by Corey Rosenbloom

What is Sector Breadth revealing about the health of today’s rally, and which stocks are ...

Exploring a Hidden Resistance Level in Amazon AMZN
Fri, Mar 21, 1:11 PM ET, by Corey Rosenbloom

On the surface, Amazon (AMZN) shares triggered a mini-Bull Trap on a break through daily ...

The New Options Trading Secrets Free Video
Thu, Mar 20, 6:11 PM ET, by Corey Rosenbloom

If you’re new to options trading, it can be helpful to learn as many strategies ...

March 20 Sector Breadth and Intraday Trending Stock Scan
Thu, Mar 20, 1:51 PM ET, by Corey Rosenbloom

Which stocks are “Trend Day” Candidates and what is Sector Breadth revealing about today’s session? ...

Setting Up a Bollinger Band Squeeze and Triangle Play in Apple AAPL
Thu, Mar 20, 1:11 PM ET, by Corey Rosenbloom

While most traders have gone cold on Apple (AAPL) – understandably so – it may ...

March 19 Fed Day Trending Stocks and Breadth Update
Wed, Mar 19, 1:41 PM ET, by Corey Rosenbloom

On today’s special “Fed Day” session, which stocks are the strongest intraday trenders (there are ...

Head and Shoulders Reversal Trade Planning for Celgene CELG
Tue, Mar 18, 12:31 PM ET, by Corey Rosenbloom

Despite a strong uptrend, Celgene (CELG) shares face a critical challenge at a make-or-break(down) support ...

A Lesson and Swing Trade Planning from Caterpillar CAT
Mon, Mar 17, 2:11 PM ET, by Corey Rosenbloom

I’ve been covering the price breakout and impulsive trend move up for Caterpillar (CAT) shares. ...

March 17 Intraday Trading Stocks and Breadth Grid Update
Mon, Mar 17, 1:11 PM ET, by Corey Rosenbloom

As we trade through St. Patrick’s Day, which stocks top the list of intraday uptrenders ...

Strength and Breakouts in Sleeper Utilities XLU
Fri, Mar 14, 2:21 PM ET, by Corey Rosenbloom

We don’t see Utility Stocks gain as much media coverage or trader attention as high-flying ...

VIX March Futures and Options Expiration on Tuesday, Not Wednesday
Fri, Mar 14, 2:11 PM ET, by Bill Luby

Just a quick reminder for those who may not be aware of it that the ...

Top Trending Stocks and Sector Snapshot for March 14
Fri, Mar 14, 1:31 PM ET, by Corey Rosenbloom

On a sideways range day in the US Equity Market, we may be less interested ...

  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

TVIX Premium to Indicative Value Creeping Back Up… | Self Directed Investor | Copyright © 2008 - 2014, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of over 1000 individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.