VelocityShares Daily 2x VIX Short Term ETN (NASDAQ:TVIX)

CAPS Rating: 1 out of 5

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Player Avatar mikey22222 (< 20) Submitted: 4/4/2013 10:31:31 AM : Outperform Start Price: $35.70 TVIX Score: -32.26

Every maven in this site is short volitility

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Member Avatar bbmaven (100.00) Submitted: 4/5/2013 3:47:19 PM
Recs: 2

Mikey,

I think you are not reading carefully. Being short TVIX is NOT the same as being short volatility. Volatility goes up and volatility goes down, but it ALWAYS regresses to a mean. Being short TVIX is being short a flawed instrument that tries to match the DAILY movements in volatility. It cannot succeed on a long term basis - its objective is to do so in the short term - DAILY.

As volatility reverts to the mean, TVIX will lost value - so if volatility is exactly the same six months from now as it is today, there is a very good likelihood that TVIX will be at less than $1.50, particularly if we see rapid moves up and down. You win on this only if volatility spikes - and does so very soon - and you immediately close the pick. If volatility spikes, I have the luxury of just waiting until volatility regresses to the mean - and it will - and then my pick is ahead.

Good luck

Member Avatar bbmaven (100.00) Submitted: 4/22/2013 2:38:19 PM
Recs: 1

Are you beginning to understand now Mikey? On the date you selected TVIX, the VIX closed at 13.89. Today, it is at 14.72, up around 6%. Curiously, TVIX is down over 15% in less than three short weeks. Why is volatility up and TVIX down? If you want to play in this sandbox, you really do need to understand this phenomenon and why it is happening to you.

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