Forget too big to fail. The recent trouncing of VelocityShares Daily 2X VIX Short-Term ETN, better known by its symbol — the TVIX — is too complicated for most people to care.
What a shame.
This levered electronically traded note (ETN) is tied to the S&P 500 VIX futures, which measure the implied volatility of S&P 500 index options.
The very nature of what it is, as a derivative of a derivative, makes it too complicated for comfort. Add in the arcane nuances of ETNs, not to be confused with exchange-traded funds , you get full glazing over of the eyes.
That’s even after the TVIX’s trounce, which has caused its share price to fall by 60 percent in recent days — the biggest disconnect from reality (or “premium discount spike,” as the pros put it) of an ETN that anybody can remember.
Surely this must have sparked concern by the Securities and Exchange Commission.
Hardly, which gets to my outrage.
First a little background: The TVIX was created by Credit Suisse to give investors a chance to make a super-turbocharged bet on the VIX. It was generally doing what it was supposed to do until Feb. 22. That’s when Credit Suisse, without explanation, issued a terse press release saying that it would temporarily stop issuing new shares in the TVIX.Page 1 of 5 | Next Page