Seeking Alpha

Cash disappearance machines, 3 VIX ETPs (VXX, TVIX, UVXY) currently have $1.9B in assets despite...

Cash disappearance machines, 3 VIX ETPs (VXX, TVIX, UVXY) currently have $1.9B in assets despite inflows of $4.5B YTD. The design of these makes them more like options - in most environments declining as time passes. The different construction of other VIX products - VQT and XVZ - has allowed them to preserve a bit more value even as volatility erodes.
Comments (29)
  • You cant trade VQT and XVZ with such low volumes.... Seriously!


    TVIX should be investigated for fraud, apparently they don't consider VIX jumps up after hours or pre-market part of their plan they just take the money and run!


    TVIX for example today is - .72% and VIX is up 5.44%, even VXX outperforms TVIX in gains. SAD FACT TVIX is broken.....
    8 Oct 2012, 03:49 PM Reply Like
  • Nothing is broken, you can join 'they' by shorting TVIX and thus profiting from it. Ah... now comes the but?
    8 Oct 2012, 09:56 PM Reply Like
  • "The long term expected value of your ETNs is zero."


    This is on the TVIX prospectus. These things are designed to go to zero. Money for nothing.


    I had already called the attention to it:
    8 Oct 2012, 03:53 PM Reply Like
  • TVIX is not broken. It follows the FUTURES not SPOT. You just have to know what you are trading.


    You can't start trading volatility blindly as you will get destroyed, but if you educate yourself, it can definitely be traded successfully.
    8 Oct 2012, 04:08 PM Reply Like
  • TVIX and UVXY both trade on futures, they resynch every day. When the VIX is rising in a day and the S&P futures are falling these ETP should rise. As witnessed yesterday VXX went up, UVXY went up, TVIX was negative. Then inside of the same day if TVIX goes up it does so at a 1 to 1.25% versus VIX but on the downslope it does this on a 2.5 to 1 perspective. Supposed to be 2 to 1 both directions.


    How is that not broken?
    9 Oct 2012, 08:49 AM Reply Like
  • The question people should be asking is where did that money go?


    These instruments are not meant for ordinary traders to make money but for the big banks like Barclays and Credit Suisse to make a killing at the cost of those poor greedy suckers who refuse to see this simple truth looking them in the face.
    8 Oct 2012, 04:16 PM Reply Like
  • I, for one, would be willing to participate in a class action lawsuit to recover losses including punitive damages from the perpetrators and beneficiaries of this fraudulent and criminal theft from investors. We investors who wish to hedge downside market risk should not be treated like dirty little thieves, attempting to game the elitist scrooges, who run Barclays, Credit Suisse and etc. Some investors do have backbones, and resent this type of deceit by the bullying money grabbers of the world!!! Justice must be the goal of the victimized investors of these bogus banks with their slick, sleazy, shabby products. For those individual investors who have bet against their long investment in volatility by purchasing ETN's which are shorting volatility, please submit an article to Seeking Alpha detailing your gains or losses by using this strategy. God bless the individual investor!
    9 Oct 2012, 02:52 AM Reply Like
  • But these ETNs perform exactly as advertised. Where is the malpractice when something does exactly what it is meant to do?
    9 Oct 2012, 06:25 AM Reply Like
  • If we had a shock similar in size to Lehman brothers going out of business I think I'd have made some money. The truth of the matter is these are insurance instruments like options. There is a steady small outflow unless there is some large and less likely payoff event.


    I feel that risk is generally being understated, but that does not help in this case. Once again it is not the risk itself that is being traded but the sentiment of the risk. Note the steady increase in standard deviation and statistical volatility on a monthly s&p chart: yet implied volatility is descending.


    At some point it will break, but using these instruments to hedge this could be too costly.
    8 Oct 2012, 04:21 PM Reply Like
  • If you want to make money on the other side of the trade choose a VIX inverse fund such as (XIV). (XIV) takes the other side of the (VXX) trade.
    8 Oct 2012, 05:51 PM Reply Like
  • XIV has been going gangbusters!!
    21 Jan 2013, 01:37 PM Reply Like
  • People need to read a prospectus once in a while...and learn what contango in a futures market means. TVIX has done exactly what it should have under the market conditions of the last year or two.
    8 Oct 2012, 06:13 PM Reply Like
  • It's done what it should have but the market itself does not seem to be factoring in the risks in the world at this time. Are we building up for another BIG hit?
    9 Oct 2012, 08:48 AM Reply Like
  • I gamble with SVXY and UVXY all day long.
    Not sure I understand them apart that they are opposites.
    They somewhat follow the S&P. (I think)!
    Normally I wait for UVXY to drop, then buy 3400 shares of UVXY...
    When it goes back up, I sell.
    Then buy 1400 shares of SVXY and wait for UVXY to drop.
    It's boring, but I take small gains and small losses.
    So far so good!
    8 Oct 2012, 09:07 PM Reply Like
  • You may do better to short them (one at a time), since they both exhibit this time decay.
    9 Oct 2012, 08:45 AM Reply Like
  • Can't short most ETF'S on TD Ameritrade.
    You can only buy and then sell.
    9 Oct 2012, 09:27 AM Reply Like
  • Very cunning of them!
    10 Oct 2012, 09:22 AM Reply Like
  • I am shorted UVXY, VXX and TVIX many a times via TD Ameritrade.


    It is true that at times, there is no UVXY for shorting.


    Case in point, a few minutes ago, I place a limit sell short of UVXY at both $30 and then change the price to $29.15 and in both instances, my order was active. This is further confirmed from ThinkorSwim platform, see screen shot here,


    FYI, when UVXY cannot be short, even a limit sell short will also fail, unlike this case.
    11 Oct 2012, 11:10 AM Reply Like
  • I also use TOS.
    It just says REJECTED that this stock is not available to borrow.
    Tried changing limit price
    12 Oct 2012, 08:43 AM Reply Like
  • Strange. Am still able to do a limit sell short a few mins ago.


    May want to call up TDA to ask why I can and you can't.
    12 Oct 2012, 09:57 AM Reply Like
  • How many shares are you buying or shorting?
    I'm playing around with 3400 shares.
    Anyhow I will ask them.


    Most of the time I am buying UVXY when S&P is falling, or buying SVXY, when S&P is going up.


    I don't know if you can relate to this pattern?
    13 Oct 2012, 09:05 AM Reply Like
  • My strategy is simpler, ie. long or short UVXY... with a prefer to short UVXY because of it's current contango & -ve roll-yield.
    15 Oct 2012, 09:15 AM Reply Like
  • Why is that?
    Explain why they are so clever?
    11 Oct 2012, 08:32 AM Reply Like
  • In my opinion, the ability to short these is intermittent partly for legitimate reasons, but sometimes suspicious reasons. It's hard to prove anything as a little retail customer. However, if your strategy depends on it, it becomes too frustrating. It's like going to war with a rifle that is known to fail or jam. Another observation that I have is that the ETF's/ETN's tend to under-perform, legitimately, since their prospectus usually states the reasons, for example, fees.


    Due to this systematic decay, it makes sense to short them in some circumstances, somewhat like selling a straddle. You can make money if volatility is in your favor.


    The sinister side is that sometimes you can't seem to short these ETFs/ETNs just when you need to. I do not know why. But let me ask you this. Why do they provide a long AND a short version of the instrument? They would claim to make it easy for an unsophisticated or unauthorized retail client to do the trade he wants (but in the prospectus sometimes they warn off this sector.) I think so they can collect this "decay" on both sides of the equation. It is their "fee" for providing the legitimate service to those willing to pay for it.


    Now if the shorting of these instruments is squirrely in it's execution, it further benefits the house. It may not be in the house's interest to investigate how or why this is happening. I still ask myself the question: why do they provide long and short versions of the instruments? To me that is a red flag.
    15 Oct 2012, 09:07 AM Reply Like
  • I'm not sure UVXY and SVXY have the same weight.
    Today.. I would have loved to short UVXY but continued to buy SVXY for most of the day.
    One other thing I noticed which is of great help....
    The S&P starts moving before UVXY and SVXY have time to react.
    These guys lag behind at least 10 seconds...
    This enables me to switch direction and get on the correct side of the rally.
    I do not know if you guys can relate to this?
    15 Oct 2012, 06:56 PM Reply Like
  • What would be the different bet shorting UVXY vs long SVXY ? but my broker only allow 150% margin on short and 200% on long. So i can purchase more SVXY. but if UVXY is meant to hit zero due to contango, does SVXY do the opposite... it can only go up over time ?


    any insight would be great.
    23 Oct 2012, 11:59 PM Reply Like
  • can someone explain if there is a difference between shorting UVXY vs buying SVXY ? because my firm allow me to short 150% of acct balance and long 200% of long position. If UVXY over time will always decay to zero, does it mean that SVXY over time can only go to infinity ?
    23 Oct 2012, 11:59 PM Reply Like
  • Yes there's a difference
    UVXY is leveraged 300% and Svxy is 200%
    You will always make more money when buying UVXY than SVXY.
    Shorting UVXY is also better than buying Svxy.


    Since I cannot short UVXY i am forced to buy Svxy, when the S&P goes up.
    24 Oct 2012, 08:45 AM Reply Like
  • If Israel launches an attack on Iran (UVXY) SKYROCKETS.


    If China and Japan go to war (UVXY) SKYROCKETS.


    If there is another terrorist attack in the West (UVXY) SKYROCKETS.
    21 Jan 2013, 02:01 PM Reply Like
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