Friday, 9 August 2013

TVIX, UVXY - vainly trying to battle higher

With the main indexes closing moderately lower, the VIX gained 5%, and the 2x bullish VIX instruments of TVIX and UVXY both closed higher by around 3%. Near term VIX trend is to the upside, but much higher levels of volatility look very unlikely for some weeks to come.

TVIX, daily

UVXY, daily


First, keep in mind the weekly VIX...

Across the week, the VIX gained almost 12%, which certainly merits some attention.

General pain for the leveraged players

From a simple price perspective, it is easy to argue that until there is a daily close above the 10MA, the relentless down trend continues.

For the TVIX & UVXY holders, the obvious problem remains one of a market that is almost entirely fearless. The relentless 'statistical' decay remains the inherent issue in such leveraged trading instruments, and frankly, I find it bizarre that so many are still trading these things at all whilst the VIX remains at such a low level.

Arguably, the only time TVIX, UVXY, and even the more stable VXX are worth bothering with, is when there is decent market volatility, and clearly, that is NOT the case the right now.

My general market outlook into September is for a multi-week down cycle to sp'1600/1550, but even tht might not be enough to kick the VIX above the key 20 threshold.

For TVIX and UVXY..the long term direction is clearly to zero - but then..even the prospectus notes that!