An exchange-traded note issued by Credit Suisse Group AG , commonly known as TVIX, that tracks stock market volatility is trading at a premium of about 3% over what it should be priced based on its underlying securities. That premium is about twice the average for the past year.
To many traders it is only a matter of time before markets fall, and they want to see it coming before others do. Although XIV and TVIX have differences, Pinkleton added, “You never want to be in that situation as a trader. So when questions are raised about TVIX you’re going to be a little restless.”Formally known as VelocityShares Daily 2x VIX Short-Term ETN , TVIX tracks twice the returns of the S&P 500 VIX Short-Term Futures Index, a measure of market volatility.
One explanation of why the premium may have appeared lies in how Credit Suisse controls the supply of new shares, traders and analysts said.When the TVIX trades at a premium to its theoretical value, large financial institutions short it. When the issuer releases new shares at the theoretical value, the financial institutions settle the short position and pocket the profit.
globeinvestor $TVIX
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