TVIX, UVXY - another cycle of disaster

With the uncertainty of the debt ceiling out of the way, and the sp' breaking into the 1740s, the VIX has effectively collapsed across the past 8 trading days, falling from 21.34 to 12.34. a drop of almost 50%. For the leveraged bullish VIX instruments of TVIX and UVXY, it has been another disastrous trading period.


TVIX, daily

UVXY, daily

Summary

First, a reminder on the VIX, on the bigger weekly cycle...

With the VIX collapsing almost in half, it is no surprise to see the 2x bullish VIX instruments of TVIX and UVXY effectively cut in half since last week. Indeed, in some ways, its almost surprising they aren't lower!

Many in the trading world appear to agree that the VIX will likely remain low for some weeks, if not into early next year. Certainly, we'll likely see the VIX in the mid, maybe even the upper teens by year end, but the 20s look out of range.

If that is the case, we'll surely see huge problems of decay in the leveraged bullish VIX instruments. Perhaps on the order of 90/95% by Jan/February. As ever, what remains clear, such 'things' are for short term holds only, with damn tight trading stops!