garachen
Registered: Dec 2007
Posts: 152 |
02-06-12 11:41 PM
Quote from njrookie1:
You mean they calculate daily implied value using mid b/o at closing WITHOUT actually hold the VIX futures?
I am suspicious:
1. you can swap your positions to futures if you have 50k lot.
2. that is lots of credit risk.
3. on their daily dollar weight chart, they do show the fraction in front and 2nd month futures.
K. I last read the prospectus about 1.5 years ago. There is actually some separate index they settle to that can be 'adjusted' at will. It's calculated by themselves. My memory is hazy here. But I found it suspicious at the time.
2. I don't see much credit risk. They collected all the money at MUCH higher vix prices. So say they took in $1B and have 300M in obligations. Doesn't really matter what they do with the $1B as it's clearly stated that it's an unsecured liability.
3. Yeah, they show that. And they say how much they have in each future. I think it's misleading. I've called the CFE to see if there are any 'off exchange' trades or agreements not reported in their daily volume. Everything is reported in the daily volume numbers. And they aren't using those crazy variance swaps either. Yet Barclays claims they are fully hedged.
What they are hedging though is future price of vol in like 20 years. They don't need to buy vix to do that. And after taking nearly 50% in management fees over that time they really don't need to own anything other than cash.
And there is NO WAY their roll numbers are transacting in the present volume. If they were actually rolling like they used to it would be obvious in the market.
It was an amazing short when it came out but very hard to get shares. Most of the other vol related products were too. Didn't even matter if it was long or double short vol. They kind of seemed designed to all go down. I only really messed with the first batch of 5 or so. So what I say might not apply to any of the more recent ones.
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