Friday, 3 June 2016

TVIX, UVXY - another week lower

With equities holding close to historic highs, the VIX remained broadly subdued. The 2x lev' bullish instruments of TVIX and UVXY declined for a fifth consecutive week, by -8.2% and -7.9% respectively. A jump in the VIX to the key 20 threshold remains probable, but that sure won't negate much of the horror story since the Feb' high.

TVIX, daily

UVXY, daily


*first, an update on the VIX, which saw a net weekly gain of 2.7%.

Outlook on the VIX...

A test of the key 20 threshold seems extremely probable, but will that be it for the summer?

If US equities can achieve the unthinkable, with sp >2134, then VIX will remain broadly subdued <20 for the remainder of the year.

Best guess... VIX 25/30 zone (if briefly), but that outlook is dropped on any move much above sp'2111/16.

As for TVIX and UVXY, a fifth consecutive week of horror, and the 14'th weekly decline of the past 17.

Since the Feb'11th high....

TVIX $13.58 >  $2.24, a net decline of -83.5%
UVXY $61.92 > $9.99, a net decline of -83.9%


As ever.. long term holds (as in 1-2 months or greater) rarely end well.

Even for those who bought TVIX in the $5s or $4s in March/April, will likely require the VIX to spike to the 20/25 zone to have any chance of a breakeven exit.

Those who bought in the 6s or higher, are going to almost certainly exit for a loss in June, or will merely see further decay.

It is inevitable that TVIX/UVXY will see periodic reverse splits, as a result of the statistical decay issue, inherent fees, and the costs involved within the instrument as VIX futures are regularly rolled across to the next month.