Friday, 19 July 2013

TVIX, UVXY - into the depths of hell

With the main indexes holding together - despite some bad earnings data, the VIX was smacked 8.9% lower into the weekend. The 2x bullish VIX instruments of TVIX and UVXY saw further significant declines of 3.4% and 4.1% respectively.

TVIX, daily

UVXY, daily


First, keep in mind the weekly VIX chart...

With the VIX declining by 9.4% across the week, it was naturally a very rough week for those holding TVIX/UVXY across multiple days.

The VIX closed Friday -8.9%, but the 2x VIX instruments actually held up 'relatively', although that was clearly due to further out 'vix futures' not decaying as much.

Awaiting the next wave higher in volatility

Another equity down wave seems likely, no later than mid August, but where will the VIX be then? With VIX now in the mid 12s, VIX11s, even 10s now look viable if sp'1700s next week.

So, further declines in TVIX and UVXY look likely in the immediate term, but it would seem the 'worse is over' least in terms of the current equity up cycle.

*As ever, all such leveraged instruments are only viable trades for the short-term. Holding more than a few weeks - even when the trend is in favour, is not advisable - as the prospectus states..rather clearly!