VelocityShares Daily 2x VIX ST ETN (TVIX)

[dude iligence]

Yeah I know what I'm talking about.Ride em hard putem away wet and give these Diluted POS 3x leverage Steroid Munching Monsters a good hard kick when you the run is over. Fly the Jet don't let it fly you. You don't have a clue about trading 3x leveraged etf's You lost your azz and your here to spew your worthless dribble about how bad TVIX is vs UVXY. Here let me just repost you worthless dribble and an explanation of how you lost your azz. Why should anyone listen to anything you have to say. Your still stuck in March 2012. Wake the F up Market changes by the moment. The fact that you are talking about March 2012 over and over speaks volumes of your inability to let go of a bad trade and move forward. To put it more bluntly you don't belong here trading 2-3x leverage etfs or anything stock related in my humble opinion.

Heres a re-post of your dribble because that's what you want to talk about. BTW I played DXO as well when Crude fell to $33, they stopped trading it when crude was in low $40's if I remember correctly. There was money made on it as well and money lost but I don't hear anyone crying about that one. UVXY is the worst of the worst of the Dixerion funds. I liken it to putting on a blind fold and placing your hand on a stove that has at least one red hot burner. You may get it right sometimes but you will get burnt and burnt bad.


Croesus I Member Level Friday, 01/23/15 01:01:00 PM
Re: dude iligence post# 8934
Post # of 9082
March 2012...







losing more than 50 percent in two trading days

Investors in a VelocityShares exchange-traded note took a huge hit last week — losing more than 50 percent in two trading days. Ouch!

The sad part is that the loss was perfectly predictable. No one should have been surprised. Still, more than a few folks were blindsided.

Today I will tell you what happened, why it happened, and how you can avoid the same fate for your portfolio.

TVIX Falls Hard and Fast

The loser is called VelocityShares Daily 2x VIX Short-Term ETN (TVIX). I talked about the boom in volatility-based ETFs and ETNs on March 15. Click here to re-read that column if you want a refresher. You’ll notice I did not recommend TVIX or any other ETNs.

As you can see in the chart below, on Wednesday, March 21, TVIX closed at $14.43. The next day it dropped as low as $9.70, and then on Friday ended the week at $7.16. The decline continued into this week with TVIX dropping below $6 on March 26.

The drop had little to do with any change in the underlying VIX index. The built-in 2x leverage wasn’t to blame, either. So why in the world did TVIX drop so hard, so fast?

The quick answer is that the higher price from which TVIX fell was artificially inflated. It never should have been there in the first place! Let’s quickly review how ETFs and ETNs work.

Creation and Redemption

Every ETF and ETN has a market price and a net asset value (also called “indicative value” in intraday data). Market price is what the shares actually trade for, while NAV is what the portfolio is actually worth.

If the market price is higher than the NAV, an exchange-traded fund or note is said to have a “premium.” When the market price is below NAV, it is called a “discount.”

Under normal circumstances, ETFs and ETNs have only a very small premium or discount. This is one of their key advantages, in fact, and is made possible by the ability to “create” and “redeem” shares in large blocks. I explained these facts of life in “Mommy, Where Do ETFs Come From?”

A breakdown in this process is the primary reason TVIX took a tumble, but another factor was closely related. TVIX is an exchange-traded note, not an exchange-traded fund. That means it is a direct obligation of the issuing bank — Credit Suisse, in this case.

(Click here to read my 2009 article, Why ETNs Are Riskier Than They Look. My explanation from back then is still accurate.)

Credit Suisse, announced in February that it would cease issuing new TVIX notes. At that point, TVIX became a broken product. Without the ability to create new shares, there was no way to keep the market price aligned with the NAV. It essentially became a closed-end fund, although many traders were caught unaware.

Why did Credit Suisse stop creating new notes?

The bank cited “internal limits” on the ETN’s size. That means Credit Suisse reached a self-imposed credit limit on TVIX. Without any new notes being issued but demand still very strong, the premium over NAV began to widen — reaching 89 percent at one point.

In other words, TVIX was a train-wreck waiting to happen.

This won't end well.
This won’t end well.
After markets closed on March 21, Credit Suisse said it would resume issuing new TVIX shares. With that, the premium to NAV evaporated. TVIX soon returned to more “normal” trading.

What happened within Credit Suisse over those few weeks? The bank had no problem issuing new shares in January, then couldn’t do it in February, and regained the ability in March. Does this make sense?

To me — no, it doesn’t make sense. But my opinion doesn’t matter. Credit Suisse and every other ETN issuer can make its own decisions on whatever basis it wants.

ETF issuers can suspend creation and/or redemption as well. But they have little incentive to do so, since they aren’t borrowing money with every new share they issue.

I’ve been around long enough to remember these things happening before …

In 2009 an ETN called ELEMENTS MLCX Gold (GOE) soared as high as 1,000 percent above NAV after its issuer (Credit Suisse again) stopped creating new shares. I warned investors of the impending collapse, and it fell 77 percent over the next few weeks before being delisted.

In early 2011, Market Vectors Egypt (EGPT) built up a substantial premium to NAV when riots paralyzed the country for several weeks. With Egypt’s stock market closed, new shares could not be created and EGPT became a broken ETF. Once again, my warning of the impending premium collapse was proven correct.

And right now iPath Dow Jones UBS Natural Gas ETN (GAZ) is in the middle of taking an even bigger drop than TVIX. Barclays stopped creating new GAZ shares last November, making it a broken product.

GAZ shares were trading at a 100 percent premium last week when a reporter asked me what was happening. The premium reached a high of 163 percent before the story broke.

Shares of GAZ have already tumbled nearly 50 percent from their peak on March 19, but it’s still trading at about a 55 percent premium. This too will eventually collapse. Even if you’re bullish on natural gas, there are better ways to capitalize on the forecast.

GAZ will do this soon.
GAZ will do this soon.
The storm clouds do have a silver lining. Stories like these get attention because they are so unusual. In almost all cases, ETFs and ETNs can be bought and sold at a very fair price. They are designed to trade efficiently — and usually they do.

Could sponsors do more to protect investors? Yes. Credit Suisse could take a lesson from Deutsche Bank and Invesco. They took the high road in 2009 when the PowerShares DB Crude Oil Double Long ETN (DXO) became so large that it started bumping up against regulatory position limits.

Rather than allow DXO to become a broken product, Deutsche Bank decided to liquidate the notes and returned $600 million to investors. It was a tough decision but clearly the right one.


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dude iligence Friday, 01/23/15 03:01:01 PM
Re: Croesus I post# 8956
Post # of 9082
Croesus TVIX actually held up much better than UVXY during the month of March 2012 UVXY just went on a shxxslide losing over 60% of its value from 15k to 5K split adjusted dollars. The VIX fell off a cliff and took a 70 degree angle downward UVXY was close behind and TVIX managed to stay up for about 6 days past UVXY. Any savy investor would have taken the time to exit the trade seeing that the VIX and UVXY had taken a huge crap. But I guess the knucklehead that wrote that article didn't have good situational awareness before he entered the trade while he was in it. So now almost 3 years later he is still carrying it around letting it influence his ability to make money. One thing I learned as a military pilot If you make a mistake flying fix it and put it behind you, learn from it and don't do it again. The guys that couldn't do this washed out of pilot training.

NEW DAY NEW JET

I heard a guy on some financial channel a few years ago say that the traders at the floor he worked on were required to close out all bad trades at the end of the week. Start over new the next week with a clear head. The traders that can't do this and carry this shxx around for 3 years lose all their money eventually. How would you like to get in an airplane with a pilot that had his mind on a bad checkride he took 3 years ago?

NEW DAY NEW TRADE

Here's some charts from March 2012 you and your author buddy can look over and learn from.

This chart Vix is the lower line dropping first and steepest UVXY is the middle and TVIX is the candles. Which would you have rather been in? I choose TVIX ,plenty of time to exit before it went lower.

[http://stockcharts.com/c-sc/sc?s=TVIX&p=D&st=2012-03-01&en=2012-03-30&i=t05402929031&r=1422041882651][/img]


The next UVXY is the candles and TVIX is the line, the upper line. Which would you have rather held at the time?




The next one $vix is the candles and UVXY is the lower line TVIX the upper line

http://stockcharts.com/c-sc/sc?s=$VIX&p=D&st=2012-03-01&en=2012-03-30&i=t41978954887&r=1422042825825


I can't explain why UVXY and TVIX dropped at different rates or times but most likely due to the options they held. I would have rather been in TVIX when the VIX fell from 20 to 12 in 4 days at the beginning of the month.