VIX is close to being undervalued: Cheap way to play it

[Maverick74]

Careful

2012 TVIX Disaster
Issuer Credit Suisse stopped issuing TVIX shares in February 2012. Due to the limited supply, the TVIX started to rise as premiums between the net asset value (NAV) and the market price had risen as high as 90%. Retail investors were in for a rude awakening on March 22, 2012, when the TVIX collapsed 29.3% and proceeded to fall another 29.8% the following day. The TVIX fell from $14.43 to a low of $7.16, a drop of over 50% in 48 hours. Even more shocking was that the price collapse was completely unrelated to the underlying moves of the VIX Index. In fact, the VIX Index actually rose higher on that second day. Immediately after the sell-off, Credit Suisse released a statement that it would resume issuing shares again. The suspicious timing of the sell-off and news release led to many class action lawsuits. This is a cautionary tale for investors to always check the premium between the market price and NAV of an ETN product. Most importantly, the TVIX pricing is completely market driven without structured pricing mechanisms in place. It is not a product for long-term investment, nor for unsophisticated investors.



Read more: (TVIX) VelocityShares Daily 2x VIX Short-Term ETN: Who is Invested? | Investopedia http://www.investopedia.com/article...-shortterm-etn-who-invested.asp#ixzz48TyICiKx
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This was already discussed. In this "very" thread.

 

[nitro]

This was already discussed. In this "very" thread.

Ok good.

 

[nitro]

Vol is cheap for a reason. Even at 2, TVIX is probably a no play. IRs won't be raised to at least September, and imo, probably December. That means the stock market will simply go higher.

There is something to be said for starting with a small position, and adding to it once a month until December. So say you can afford 500 shares of TVIX. Nothing wrong with adding in increments of say 30 to 50 shares at a time until you have full position on by December.

This way, you aren't saying you know everything. But if you believe this levels aren't justified, you just that you believe that you don't know the exact timing of at least a 5% to 10% correction. If the correction is 20%, you almost always have a great chance to get in a large part of it. You will probably be starring at a losing position for months, and then one day, you will have a smile on your face.

Another way to play it is simply to wait until you are on the right side of momentum. This is probably the preferred way that pros play it, since in the absence of a catalyst, what business do we have pretending we know what will happen six months in the future. The hard part is you will probably miss the first 4% of the move. On the other hand, you won't suffer for months either if the market grinds higher.

 

[Maverick74]

Vol is cheap for a reason. Even at 2, TVIX is probably a no play. IRs won't be raised to at least September, and imo, probably December. That means the stock market will simply go higher.

There is something to be said for starting with a small position, and adding to it once a month until December. So say you can afford 500 shares of TVIX. Nothing wrong with adding in increments of say 30 to 50 shares at a time until you have full position on by December.

This way, you aren't saying you know everything. But if you believe this levels aren't justified, you just that you believe that you don't know the exact timing of at least a 5% to 10% correction. If the correction is 20%, you almost always have a great chance to get in a large part of it. You will probably be starring at a losing position for months, and then one day, you will have a smile on your face.

Another way to play it is simply to wait until you are on the right side of momentum. This is probably the preferred way that pros play it, since in the absence of a catalyst, what business do we have pretending we know what will happen six months in the future. The hard part is you will probably miss the first 4% of the move. On the other hand, you won't suffer for months either if the market grinds higher.

30 shares of a $2 stock? Does that include his fast food budget money or not? LOL. No, the pros will just buy bonds and get paid yield to hold downside protection instead of leveraging down into the abyss and hope to break even in 6 months.These are NOT the products to avg down into.

 

[nitro]

UVXY has options on the underlying, potentially making it an even better vehicle for the cash strapped retail trader. Keep in mind that it has many if not all the problems of TVIX.

http://finance.yahoo.com/echarts?s=UVXY+Interactive
http://finance.yahoo.com/q/op?s=UVXY+Options

 

[nitro]

Does VIX know something the rest of the market doesn't know?

There's an odd disconnect between the fear index and the market

http://www.cnbc.com/2016/06/14/theres-an-odd-disconnect-between-the-fear-index-and-the-market.html

 

[nitro]

Does VIX know something the rest of the market doesn't know?

There's an odd disconnect between the fear index and the market

http://www.cnbc.com/2016/06/14/theres-an-odd-disconnect-between-the-fear-index-and-the-market.html

In retrospect, interesting, isn't it?

 

[nitro]

I am uncertain what is the correct vol play here.

 

[wildchild]

I am uncertain what is the correct vol play here.

You already missed the play. The correct play was to short volatility after the Brexit hysteria.

 

[trader99]

Is TVIX going to zero? LOL. I own some of it at levels which I thought was "cheap". It's certainly a lot cheaper now. Fortunately, it's only a small part of my total portfolio. But still scary watching it going down every day..