Presenting The TVIX: A Double Leveraged VIX ETF

Tyler Durden's picture

Ever feel like this market just does not provide enough unique and suicidal ways for you to lose your hard stolen money within nanoseconds of trade execution? Never fear - here comes the TVIX, a levered third derivative bet on volatility: simply said, the TVIX will be the world's first double leveraged VIX ETF. According to the ETF creator, VelocityShares, "the TVIX and TVIZ ETNs allow traders to manage daily trading risks using a 2x leveraged view on the S&P VIX Short-Term Futures™ Index and S&P 500 VIX Mid-Term Futures™ Index, respectively, while the XIV and ZIV ETNs enable traders to manage daily trading risks using an inverse position on the direction of the volatility indices. The indices were created by Standard & Poor's Financial Services LLC, a division of the McGraw Hill-Companies, Inc." Then again, why not just call these what they are: a novel way (brought to you via the synthetic CDO legacy product known as ETFs) to lose money with a 99.999% guarantee. As always, we wonder why anyone would trade this product, when, with much better odds, one would at least get comped in Vegas...

Here is the full product suite about to launched by Credit Suisse.

One has to love the fine print:

The ETNs, and in particular the 2x Long ETNs, are intended to be trading tools for sophisticated investors to manage daily trading risks.  They are designed to achieve their stated investment objectives on a daily basis, but their performance over longer periods of time can differ significantly from their stated daily objectives.  Investors should actively and frequently monitor their investments in the ETNs. Although we intend to list the ETNs on NYSE Arca, a trading market for the ETNs may not develop. 

In this case, and as in everything else related to the market, our advice is stay away from these synthetic contraptions which are merely CDOs (and now CDOs cubed) for public consumption. On the other hand, we can't wait for someone to finally release an ETF or any other mechanism, that allows for the simple shorting of GM stock.

 

 

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matthylland's picture

nonsense. I just put a few thousand shares into my IRA. buy and hold is back, didn't you hear?

Dismal Scientist's picture

The finest episode of South Park is Margaritaville. Season 13, Episode 3. Mind you, The Underpant Gnomes episode did a good job of skewering venture capital, to be fair.

'And ... its gone !'

SheepDog-One's picture

Underpants Gnomes business plan-
Step 1- Collect underpants.
Step 2- ?
Step 3- PROFIT!

Sounds like underpants gnomes and Bernanke have a whole lot in common.

Byte Me's picture

Sounds like underpants gnomes and Bernanke have a whole lot in common.

Bermankie is their leader...

Mercury's picture

I am hereby initiating a paper trade of:

$10k short the 2x VIX ETF and  $10k short the 2x inverse VIX ETF.

CPL's picture

You'll lose and much as you win because of the leveraged decay.  Don't bother buying them, just use them to measure against the x2 Proshares ETF's.

Mercury's picture

Aside from the difficulty of each of those ETFs mirroring each other it seems inherently difficult for them to have any influence on the underlying since the VIX is just a measurement...like the temperature.  Unlike equity or commodity derivatives - how does the tail wag the dog here?  Plus, this new VIX is more complicated than the old VIX (now VXO I think).  And if I remember correctly from '08 nothing screws up VIX ETFs like actual volatility.  That said, even if I'm right, some squid programer in sub-basement 7 of Getco HQ has probably already figured this out.

We'll see....if I'm up significantly by the end of the year I'll never shut up about it, that's a certainty.

ZeroPower's picture

CPL, you actually can make $ shorting both. I know of 2 individual funds (out of many im sure) that actively 'short the pairs' so to speak.

i.e. same amount of short on FAS/FAZ and exit before the splits. I dont have the returns but i've been told they were + and one is able to replicate this if done with any other levered ETFs.

Id fight Gandhi's picture

So short vxx and this together so you can pocket the decay?

RobotTrader's picture

S & P, CME, etc. have a long way to go.

If you think this thing is exotic...

It's nothing compared to the exotic "derivative" or "conditional" plays you can make at most of the major sports books these days.

There is a market for just about everything....

SheepDog-One's picture

WOW thanks for that quite informative and relevant post RoboT!
I hear theres even a market for Afghani heroin, being Wall St's biggest cash business at over $500 billion yearly.

iota's picture

Wow, so long smack then.

MarketTruth's picture

The banks admitted that if it was not from the illegal drug trade during the peak crisis, the banks would have lacked money. True.

dark pools of soros's picture

i remember makin $87 betting that Obama would win..  figured I would front run the obvious

carbonmutant's picture

You know we have a fence along the Golden Gate Bridge to keep people from jumping off...

flacon's picture

I read that as "Goldman Sachs Bridge"... LOL! 

tallystick's picture

And..............it's gone.

SheepDog-One's picture

THEY TOOK RRRR JEEERRRRRRBS!!
Sorry, just sayin'...

AccreditedEYE's picture

When do the options start trading? hahaha

sbenard's picture

I'll trade them! I can't wait!

Byte Me's picture

5 stars and a gold 'well done' badge to TD for the clip from South Park 13x03 Margaritaville!

I liked the part where Stan discovered how compensation is 'assessed'.

ZeroPower's picture

I'd argue its even a 4th derivative!

1st = I.V.

2nd = the options

3rd = VIX

4th = 2x ETFs

Anyone can make it to a 5th?

Agent P's picture

The logical derivative of TVIX is Peanut Butter TVIX...not nearly as good as the caramel original, but highly desired due to its rarity.

IdiotInvestor2's picture

5th = Options on these TVIX family of ETFs !

count_zero's picture

Where's the daily-rebalanced-leverage index? I'd like deversify my losses.

Thomas Hoenig's picture

I can't wait until these we have to bail these idiots out too. 

Nathan Smith's picture

5)  ETF to track the decay of 4)

 

 

buzzsaw99's picture

Is this a trick to get me to buy more options or something? I buy options betting that the volume of options decreases? Like when I buy FAZ from bankers, who collect a fee, then extend leverage, collecting another fee, but then their earnngs go up but I am betting against them then why am I paying them a...

 

Never mind, head exploded.

theone's picture

The amount of money I am going to lose trading these .

The emotional toll of holding these over night? Piceless

AccreditedEYE's picture

Looks like you can now trade like a TBTF.... just don't expect a Gov. bailout on your losses.

Downtoolong's picture

I hear you can buy these ETF’s on margin in your eTrade account. They’ll contribute up to $100 free matching funds on your first bet (er investment) if you agree to take any winnings (er profits) in casino chips from MGM Las Vegas. If you receive a margin call within the first five days, they’ll even throw in a free coupon for the early bird buffet.

calltoaccount's picture

ETF's are FRAUD w a capital F.  65% of recorded naked shorts (243Billion out of 376bn) are in ETF's.

http://ftalphaville.ft.com/blog/2010/11/08/397431/kauffman-etfs-are-the-...

 

And that doesn't account for all the ex-clearing naked shorting (trades cleared directly by brokers bypassing the counterfeit enabling DTCC) which the crimocentric system not only tolerates, but encourages.  Rotten to the core--   

Djirk's picture

Oh good, I was looking for a way to lose the money I took as profits on GOLD

omi's picture

This is absolutely retarded. For those that want to trade volatility, there are two very direct tool that are available to retail clients:

1. Options

2. VIX futures

 

What I find disturbing is that 'finding an edge' became 'creating an edge' as of 3 years or so ago. This creates a great opportunity for several tiers of traders to front run these ETFs both in volatility futures and index options.

IrrationalMan's picture

if you are retail i would suggest the mini instead.  has 1/10 of the notional. 

http://cfe.cboe.com/Products/Spec_VM.aspx

variance swaps have a nicer payoff structure if you are going long vol though, the square payoff can really move as it starts to increase. 

 

Anyone have thoughts on the options on VIX.  To me the vol is just too high on those to be able to make any money. 

TomJoad's picture

"poof"

 

Jump! You Fuckers!

swissinv's picture

full credit risk!!! good luck

jmc8888's picture

Wow, made by the purveyors of your childrens propaganada, I mean school books.

That's just amazing.  McGraw-Hill, you didn't understand 7th grade Algebra? No problem, we couldn't teach THAT to you very well, now comes our 3rd derivative ETF.   See why we made our books so fucked up? We needed to dumb you.....

What next Donald Duck cigarettes?

Glass/Steagall means this shit isn't around.  Also when it's implemented, this ETF is worth 0.  So buyer beware.