It's simple folks. The true value of the underlying assets in TVIX is displayed on VelocityShares website each day. http://www.velocityshares.com/products.shtml People were buying it at a huge premium when new creation units were no longer being created. Why were they buying it at such a HUGE premium? Good question. It's STILL trading at a premium. See the URL I gave you. The question isn't why did TVIX fall today. The real question is why were people buying it so much higher than its true value in the first place.
Correct. Another real question: Why is GAZ trading at a huge premium to its intrinsic value? Answer: For the same reason as TVIX. I don't think it's that impressive really - every trader who was watching the IV for TVIX (and GAZ for that matter) knew about the mispricing. It's just that there were enough muppets to bid up TVIX so such a ridiculous premium.
Wow! Check this out!!! http://finance.yahoo.com/news/credit-suisse-plans-reopen-issuance-232400592.html Another chapter of the story. Did someone know that was coming??? It's awfully coincidental that the thing tanked & then that PR comes out after the close. Did the fall cause the issuer to come out with that PR? OR, did someone know that PR was coming & got out before all the premium in the TVIX was let out of it. It sure seems fishy. They should track the trades from when it first started falling.
Oh sweet...they are going to issue more shares for us to buy. You first and I will buy next, promise. This thing has been broken for weeks and people are just now noticing?
Another take on the crash. The TVIX Debacle "UPDATE: What is probably most likely the driver of the collapse, however, is the reversion to reality (akin to the NAV premium) as pointed out by Nic Colas (h/t) of TVIX (the actual equity position) to TVIXIV (the underlyting vol index itself)..."
Same as Jackpearson above - I was busy dealing with the disappointment that I could not short TVIX. And I was also busy shorting GAZ. Despite the recent decline from 6.90 to 4.90, GAZ is still at double its intrinsic value of 2.45. http://finance.yahoo.com/q?s=^gaz-iv&ql=1 http://finance.yahoo.com/q?s=GAZ
An interesting article on TVIX written about 1 month ago. http://ftalphaville.ft.com/blog/2012/02/22/892951/double-trouble-in-tvix/