A subject near and dear to our flinty hearts.
From FT Alphaville:
Macro Risk Advisors’ (MRA) Dean Curnutt has picked on a very interesting development in the land of volatility ETNs. In the last few days there’s been an absolutely astounding amount of vega trading through these products....MORE (the good stuff)
As he notes:
One client summarized the situation as “the volatility ETNs are the dog and SPX implied vol is the tail.”The above applies to two products specifically, the VXX — the long-standing Barclays iPath ETN whose strategy is focused on rolling across short-term Vix futures — and TVIX, a 2x levered VXX product marketed by India’s VelocityShares, but backed by Credit Suisse and launched in November 2010.
It’s the sudden growth in the shares outstanding of the latter — to 35.725m this February week versus less than 6m in December 2011 — which is perhaps the most eye opening:
Though shares outstanding in the VXX have also been rising steadily