Friday, 22 November 2013

TVIX, UVXY - relentlessly decaying

With equities continuing their broad climb, market volatility remains low. The 2x bullish VIX instruments of TVIX and UVXY are naturally decaying into dust, having declined 11% this week. The remainder of the year will probably see a further 15/20% of decay.

TVIX, daily

UVXY, daily


*first, an update on the VIX, weekly, which gained 0.6% on the week.

I do not expect VIX to break >20 until Jan/Feb..and even then, I expect that to be a typical 'brief spike' affair.

In terms of the VIX instruments, to me, it makes zero sense to be involved on the bullish side of volatility until early next year. Even then, any equity market decline will be moderate and brief. The VIX will struggle to hold the high teens, never mind anything in the low 20s.

The only decent bullish VIX trade, is arguably not until late spring/early summer 2014..and even then, finding a decent entry - without suffering too much decay...will be tricky.

Frankly, the notion of holding TVIX/UVXY - or even VXX, from now..into early next year, seems utter madness.