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 …
One of the persistent characteristics of the CBOE‘s VIX® index is the Christmas Effect—the tendency for VIX to drop down to relatively low levels during the Christmas holidays. The CBOE’s VIX volatility December futures predict this drop for months in advance, and it has come to pass again this year. I am aware of at least three possible explanations for this: Option market makers and others …
Bill Luby, of VIX and more, recently pointed out that the 1st / 2nd month volatility futures had recently set a record (now 70 days) for continuous time spent in backwardation—where the value of the 1st month is higher than the 2nd month. Not just a trivia question, this condition has been feathering the pockets of those holding volatility ETNs like VXX / TVIX, …
In spite of its name, XIV is not the inverse of the VIX index—it is the daily percentage inverse of an index called SPVXSP, which you can monitor on Bloomberg here. This index very closely tracks the same index that VXX uses, SPVXSTR. Last week XIV did not track VXX’s daily moves particularly well. There has been a lot of speculation about what was causing …
I was very surprised Monday morning when sentiment turned around and the market went into decline. Perhaps people were nervous that the House wouldn’t approve the budget proposal, but it seems more likely mixed economic news prevented any sort of euphoric reaction, or people realized that an agreement to add another trillion or two of debt really isn’t cause for celebration. I held onto my …
