Market Overview

TVIX Plummets Nearly 30% Despite Rallying VIX (TVIX, VXX)

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UPDATE: TVIX is currently down over 25%, trading near $10.42.

Volatility ETNs have become favorite targets for critics of the exchange-traded products business. Looking at the action in the VelocityShares Daily 2x VIX Short-Term ETN (NYSE: TVIX), no one could blame those naysayers.

Shares of TVIX are plunging, down more than 12% in midday trading on volume that looks all but certain to eclipse the daily average by the time the closing bell rings. Last month, Credit Suisse, the issuer of the VelocityShares family of ETNs, temporarily halted new creation of TVIX shares.

That may have led to a jump in TVIX's net asset value and traders could be deciding to deflate some of that premium today. Just days after Credit Suisse announced the halt on TVIX share creations last month, the ETN closed at a premium of nearly 11% to indicative value, according to ETF Trends.

Funds like TVIX, which debuted in 2010, have fans because they're fine for use as short-term trading instruments. Data on the VelocityShares Web says as much. From the TVIX Product Page: "The ETNs provide traders with an exchange traded instrument enabling them to efficiently express their market views on the short-term futures contracts on the CBOE SPX Volatility Index."

Well, TVIX might have lost at least one fan today. OptionsMonster's Jon Najarian told Benzinga a big hedge fund was taking a hit on a TVIX position and decided to liquidate that position today. In a previous conversation with Benzinga, Najarian noted that products such as TVIX and the iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) are best suited for professional traders.

That's probably sound advice as the VelocityShares Daily 2x VIX Short-Term ETN has one of the ugliest charts out there, which shows an ETN laboring almost 66% below its 200-day moving average. The fund has lost more than two-thirds of its value in the past year.

Posted-In: Long Ideas News Short Ideas Specialty ETFs Intraday Update Markets Trading Ideas ETFs

 

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