Friday, 25 October 2013

TVIX, UVXY - a week of minor chop

Despite the equity market seeing a third consecutive weekly gain, the VIX managed a fractional net weekly gain of 0.4%. The 2x bullish VIX instruments of TVIX & UVXY mostly trundled sideways in price. The issue of decay remains a key problem with a VIX that is effectively flat lining in the low teens.

TVIX, daily

UVXY, daily


First, an update on the weekly VIX

Clearly, the VIX has already seen the bulk of the drop in the current multi-week down cycle take place. The only issue now is how many weeks until the next VIX spike..and whether the next spike will be yet another low high.

Considering the continuing QE and underlying mainstream mood, it'd be surprising to see the VIX break into the 20s in the remainder of this year.

If that is the case, those holding TVIX/UVXY across multiple weeks will likely experience significant losses through the old problem of statistical price decay...even if the VIX can eventually battle into the upper teens.

The 2012 VIX high was 27, and frankly, that looks next to impossible to surpass in the remainder of this year, which is pretty incredible to reflect on.