Credit Suisse Throws Volatility Fund TVIX a Lifeline
December 17th, 2012 at 11:39am by John Spence
Credit Suisse has decided to rescue VelocityShares Daily 2x VIX Short-Term ETN (NYSEArca: TVIX) with a reverse share split before the volatility-linked exchange traded note loses all its value.
The bank announced it will implement a 1-for-10 reverse split effective Dec. 21, according to a press release.
TVIX is designed to replicate the performance of CBOE Volatility Index futures contracts with 200% leverage on a daily basis. The ETN has fallen 97% this year and has dropped below $1 a share. The reverse split will boost the share price.
There has been speculation that Credit Suisse, the issuer, would allow TVIX to fall to zero. “Without a reverse stock split TVIX will be eroded down towards zero by contango,” said Vance Harwood at Six Figure Investing. [Volatility ETFs: Is TVIX Going to Zero?]
“I had pretty much given up on TVIX because its price had slid way past the logical reverse split point and has traded below $1 for the last 16 trading days,” Harwood wrote in a blog post Monday. “However instead of fading to black TVIX will soon be back into a reasonable trading range. In addition to a reverse split it appears that Credit Suisse has been working on TVIX’s tracking problems.”
VelocityShares Daily 2x VIX Short-Term ETN
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