Friday, 27 December 2013

TVIX, UVXY - melting lower into year end

Whilst the main market is broadly still climbing, the VIX remains weak. The 2x bullish VIX instruments of TVIX and UVXY saw a second heavy week of declines, slipping -11% and -12% respectively. There is little reason why the VIX won't remain in the 14/11 zone until mid/late January.

The following two charts are 'performance' charts, from Jan'1st > Dec'27. I think they clearly highlight the issue of 'statistical decay', and how holding for more than a few weeks, really doesn't really work out so well for Mr Retail investor.

TVIX, daily

UVXY, daily


*First, an update on the VIX weekly, which declined by -9.6%

There really isn't much to add. The 2x leveraged instruments are just suffering the usual decay problem, and even the VXX will similarly be a loser-trade until late Jan/early February.

My personal view is that it remains pointless to be bullish volatility until at least the late spring/early summer, and even then, it will be somewhat risky.

As ever, such instruments are for short term holds only.