VelocityShares Daily 2x VIX ST ETN (TVIX)

[eric4x]

Sell at a premium, buy at a discount.*

It seems that I and many others misunderstood the word "premium." I was assuming that if the issuer has stopped selling shares, then we should not sell the shares either. I was assuming that they wanted the share price to gradually creep up, so that they could avoid a reverse split. Obviously, I was wrong in these assumptions.*

Credit Suisse should explain why they announced that they will start selling new shares, which caused the price to collapse. However, the suspension of share creations before should have been taken as a signal for shareholders to SELL. When the issuer STOPS selling, then the shareholders SHOULD sell.*

It could be argued that CS was giving shareholders a "heads up" that now is the time to sell. Instead of just letting the price drift downward gradually, they announced to the world that the true value of their shares would be less than the immediate market value. In hindsight, that was a sell signal.*

Someone said that they would not buy any shares if the market value dropped BELOW the Net Asset Value. I think this sounds backwards. The lesson I got from it is that we should "sell at a premium, and buy at a discount."*

I was further confused by the advice of Paulo Santos, who said that, because of the premium, we should "sell TVIX and buy UVXY." This could not have been good advice at the time, since UVXY dropped quite a bit as TVIX was holding steady. What he SHOULD HAVE SAID was to "sell TVIX now, and wait for the price to drop." The best advice would have been to sell TVIX at a premium, and then just hold onto the cash, so we could buy it back after the price was readjusted.*

They say that we should not "fall in love with" a stock. But if you feel comfortable with a certain stock, because you have better experience and knowledge about that one than another one, you feel like you don't want to give it up. Besides, TVIX has the best forum, (on the ihub ETF section for this kind of shares). UVXY doesn't have a forum like this one.*

We could think of this readjustment as trading in an older model car for a newer model of the same brand. You don't have to give up your Chevy to buy a Ford. You can give up your Chevy to buy a newer Chevy. So, we could have sold TVIX when everyone was saying to sell it, and just hold onto the cash, and buy it back later at a lower price. There was no need to immediately buy a different brand name.*

I am just dabbling here, and I don't have enough at stake to follow the market throughout the day. So, I didn't see the conversation in "real time" about short-selling on Thursday. But I did see that conversation about two months ago, in plenty of time to react.*

My conclusion is that: When people are short-selling, that is a sell signal. When active daytraders are saying, "I'm trying to borrow as many shares as I can from my broker, to sell right now," then those of us who are actually holding the shares should sell right away. SELL IMMEDIATELY, WITH A MARKET ORDER. Get out of there fast! When people are scrambling to borrow shares to sell, that means that the price is probably going to drop far and fast. Even with a small number of shares, a drop of 4 dollars per share can easily cover the fees.*

I will be adding more cash to my account in April or May. I might buy more TVIX if I think the price is right, or I might just let the new cash deposits accumulate, for some later buying opportunity in a proper stock. At least a few are still predicting that TVIX will someday go above 20 dollars, (or the equivalent higher price if there is a reverse split). As for the shares I already have, I will have to just ride it all the way down. If it goes up, that would be great, but we are talking about several times the current share price, as the current price keeps dropping.*

The whole idea of "Net Asset Value" seems misleading. A bank note is worth only what the bank will pay for it. There are no actual assets in a "note," as there are with a "fund."*

I am just spending my "hobbies and entertainment" money here. I consider it the equivalent of taking a college class. If I took a class, ALL of the money would be unrecoverable. At least here, I have the chance of a partial refund.*

I was late in posting a comment because it took a very long time to read through the hundreds of comments everyone else was posting.*

I found a link to an old sound recording from the 1929 crash. This is Eddie Cantor, and his "Tips on the Stock Market."*

This is an mp3 (audio only) recording, using the QuickTime viewer. The file is slow to open on my computer.*

http://ia700304.us.archive.org/20/items/EddieCantor/EddieCantor-TipsOntheStockMarket.mp3