Tuesday, March 15, 2011

A High Octane ETF

One ETF that exploded today is a relatively new product introduced last year namely the TVIX VelocityShares Daily 2x VIX Short Term ETN.  The ETNs are issued by Credit Suisse AG via its Nassau Branch and is an  unsecured obligation of Credit Suisse.  It does not pay interest and there is no guarantee of return of principal.   The return performance is linked to (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index (less the investor fee which is subtracted daily (1.65%/365) ) .    This product allows the end user to express a view on the direction of volatility.  Today TVIX has increased by 8.64% to 50.45  so this is an extremely high octane product and is up substantially from its most recent low of 33.56 but still way off the highs at 112.35 in mid december 2010.  No doubt the explosion in volatility is due to the recent tsunami and nuclear crisis in Japan which could be classified as a black swan event.   Once again today the Nuclear and Uranium ETF (NLR) is down almost 4.5% and the iShares MSCI Japan Index (EWJ) is down over 0.45%.  Recall from yesterdays note that during the last earthquake in Kobe in January 1995 that the Nikkei fell almost 30% through the first half of 2005.

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