Trading TVIX is complicated. I don't understand it myself. But
what I do know is that TVIX is a pos for longs because it suffers
from a negative roll yield. It tracks the two front months of VIX
futures. Because the futures are trading at premiums, it suffers
from a negative roll yield. In short, you're losing money from this
negative roll yield if long. TVIX is best for daytrades or short
term trades. Not good for longer term trades unless everything
aligns just right like last August.
The article basically points out that TVIX was trading at a high
premium compared to its NAV. The article was written 10 days ago.
Since then, the premium has inflated exponentially more, so it was
even more dangerous to be long TVIX. Longs could see this premium
yanked out from under them like today. His point was that it was
risky to hold TVIX long at the time because it was trading at 9%
premium to its NAV.
Newsletter
Subscribe to our email list for regular free market updates
as well as a chance to get coupons!
Trading TVIX is complicated. I
TVIX: An Emerging Arbitrage Opportunity
Posted by cw12 on 22nd of Mar 2012 at 02:47 pm
Trading TVIX is complicated. I don't understand it myself. But what I do know is that TVIX is a pos for longs because it suffers from a negative roll yield. It tracks the two front months of VIX futures. Because the futures are trading at premiums, it suffers from a negative roll yield. In short, you're losing money from this negative roll yield if long. TVIX is best for daytrades or short term trades. Not good for longer term trades unless everything aligns just right like last August.
The article basically points out that TVIX was trading at a high premium compared to its NAV. The article was written 10 days ago. Since then, the premium has inflated exponentially more, so it was even more dangerous to be long TVIX. Longs could see this premium yanked out from under them like today. His point was that it was risky to hold TVIX long at the time because it was trading at 9% premium to its NAV.