Can UVXY/TVIX "malfunction" like XIV and SVXY?

Discussion in 'ETFs' started by Saltynuts, Feb 6, 2018.

  1. S2007S


    So right now the VIX has dropped about 20% today and TVIX is surging around 12%

    Is this all due to backwardation and if so how long before we see TVIX follow the VIX???

    I'm interested in getting back into TVIX but not until it's closely back to following the VIX, and not until the vix is back to 10-12 range!!!

    I came close to buying today at $8.00 but thought the Dow was going to close higher... literally in the last 15 minutes about 250 Dow points are gone!!!
    #61     Feb 7, 2018
  2. Gloria, aren't you glad you didn't bother with X048? Or did you end up investing in it? Funny, this 2x inverse ETN did not go to 0, but came pretty close.
    Last edited: Feb 8, 2018
    #62     Feb 8, 2018
  3. When do you think VXX will be down around $20? I have June puts struck at 20.
    #63     Feb 8, 2018
  4. I thought the article was making your very point. Contango in the futures drives the downward tendency in the long vol ETNs. The ETNs themselves aren't penalizing us, it's the futures they are based on that moves downward to meet spot Vix at settlement.

    The whole term structure slopes downwards, ultimately landing at the Vix which is typically lower than the front month. (It's of course higher as of this writing, but that may change in a day.) SPX options being wasting assets, the back dated futures contracts must account for cost of carry, like a nat gas, etc. Thus the back months must be priced higher, all else being equal.

    VXX, UVXY, XIV, etc., are committed to maintaining an average exposure to the first 30 days of the Vix futures. They do that by holding various quantities of the first two months in the term structure to average to 30 days exposure. E.g. when there are 15 days left before expiration in the front month, half the futures are in the front, the other half are in the second month out. Or at least that's how I read the prospectus.

    Harwood's big point is that both months decay, and the fact of contango in both months is the primary cause of the decay in VXX. Thus, the daily roll has a negligible effect compared to that of contango generally. In any given day, only 1/30 of the contracts are rolled. That fraction is bought high and sold low, yes. But all 30 contracts are going down in price due to the contango in both months, and that is the real culprit behind the decay in VXX.

    He goes on to point out that VXZ and TVIZ (the medium term VIX futures tracking ETNs--months 4 through 7) go down in a regular and pronounced fashion due to the effects of contango, and there is no daily roll in months 5 and 6. The decay in those funds mirrors that of the futures, yet roll pertains to an even smaller fraction of the futures held.
    Last edited: Feb 8, 2018
    #64     Feb 8, 2018
  5. I didnt buy since the inversed 2x go down in long term anyway. Didnt expect xiv svxy got bust like this, at least not when dow is still damn high.
    #65     Feb 8, 2018
  6. S2007S


    $20 probably within 12 months, June might be a bit June I would think at least a drop below $30.
    #66     Feb 8, 2018
    stevenpaul likes this.
  7. S2007S


    Xiv would be the best trade after a 20-30% market sell off!
    #67     Feb 8, 2018
  8. This is a joke now
    Xiv is just a bust
    #68     Feb 8, 2018
  9. Hello Mav,
    Would you please elaborate a bit on "VIX has no relationship on the VX futures". I haven't tested it but wouldn't one expect the VIX index to be very highly correlated to the VX futures? Also, if you had a good short term model for forecasting the VIX index what would be a few ways to profit from that if not the via VX futures? VX options maybe? Thanks
    #69     Feb 8, 2018
  10. Maverick74


    I should be more clear. The "VIX" calculation is a "real time" calculation on SPX option prices using a formula that is provided in a white paper on the CBOE website. VX futures are the future "expected" value of those options at a specific date in the future. Only on settlement will they closely approximate each other.
    #70     Feb 8, 2018
    truetype likes this.