It's Baaack: TVIX Premium to Indicative Value Creeping Up Again

From VIX and More

If you thought the TVIX (VelocityShares Daily 2x VIX Short-Term ETN) story was behind us, you might want to think again.

No, I am not talking about the recent news that FINRA is “looking at the events and trading” associated with TVIX and more generally that the regulator has “a review under way looking at a host of issues relating to ETNs and other complex products.”

Instead, my interest is in the return of some meaningful premium in TVIX relative to its Intraday Indicative Value (a real-time estimate of an ETP’s fair value, based on the most recent prices of its underlying securities) during the last three days.

For some historical perspective, consider that in the months prior to Credit Suisse (CS) suspending creation units on February 21, TVIX typically traded at a premium of about 0.5% above its indicative value. After the creation units were suspended, the premium vacillated wildly (as seen in the graphic below), though for several weeks the premium was locked in a relatively narrow range of 10-20%. That premium over indicative value spiked to 89% on the day before the announcement that Credit Suisse was resuming creation units. Once that resumption of creation units was announced, the premium in TVIX fell all the way back to 2% in just three days, no doubt signaling to many that it would soon be business as usual in TVIX trading.

During the last three days, however, the TVIX premium is has remained largely in the 10-15% range, ending today at 11.4%....MORE