The Credit Suisse announcement on TVIX follows a spike in trading volume in the ETN, which holds more than $600 million in assets.
The VIX and More blog speculates the recent exponential growth in TVIX has violated a position size risk control rule relative to VIX futures products. It’s not clear how long the TVIX issuance suspension will last.
“The big question for investors is whether the suspension of creation units will mean that TVIX trades at a premium or discount to its net asset value. Given that supply is constrained and demand is not, the most likely scenario is that TVIX will trade at least as high as net asset value or possibly at a premium,” the blog reported.
TVIX is “targeted at sophisticated investors looking to manage daily trading risks and was not designed to serve as a passive long-term core holding,” Morningstar analyst Abraham Bailin writes in a profile of the ETN. “The application of daily leverage on a fund held longer than one day can very quickly erode the holdings returns due to the pernicious effects of compounding arithmetic.”
VelocityShares Daily 2x VIX Short-Term ETN
