Monday, November 22, 2010

Followup to "Citigroup, Inc. Begins Trading Their New Citi Volatility Index Total Return ETN Today" (CVOL; TVIX; VIX)

This is our third post on volatility products,  the first two were on Citigroup's CVOL:

Nov. 8 
"More VIX ETN's Coming: Can they Get Here by Thursday? (VXX)"
Nov. 15 
Citigroup, Inc. (NYSE:C) Begins Trading Their New Citi Volatility Index Total Return ETN Today (CVOL)
...VIX and More commented:

...The newest VIX ETP approach comes from Citigroup, where their CVOL product not only targets a new portion of the VIX futures term structure (3-4 months), but adds a +2x leverage component and also includes a “variable weighted short position in the S&P 500 Total Return Index” as well....
When I was just a wee little lad full of health and joy,
My father homeward came one night and gave to me a toy.
A wonder to behold, it was, with many colors bright,
And the moment I laid eyes on it it became my heart's delight.
It went "zip" when it moved and "bop" when it stopped,
And "whirr" when it stood still.
I never knew just what it was and I guess I never will....
Here's ZeroHedge with their take on the lastest:
Presenting The TVIX: A Double Leveraged VIX ETF
Ever feel like this market just does not provide enough unique and suicidal ways for you to lose your hard stolen money within nanoseconds of trade execution? Never fear - here comes the TVIX, a levered third derivative bet on volatility: simply said, the TVIX will be the world's first double leveraged VIX ETF.
According to the ETF creator, VelocityShares, "the TVIX and TVIZ ETNs allow traders to manage daily trading risks using a 2x leveraged view on the S&P VIX Short-Term Futures™ Index and S&P 500 VIX Mid-Term Futures™ Index, respectively, while the XIV and ZIV ETNs enable traders to manage daily trading risks using an inverse position on the direction of the volatility indices. The indices were created by Standard & Poor's Financial Services LLC, a division of the McGraw Hill-Companies, Inc." Then again, why not just call these what they are: a novel way (brought to you via the synthetic CDO legacy product known as ETFs) to lose money with a 99.999% guarantee. As always, we wonder why anyone would trade this product, when, with much better odds, one would at least get comped in Vegas...
Here is the full product suite about to launched by Credit Suisse.

One has to love the fine print:
The ETNs, and in particular the 2x Long ETNs, are intended to be trading tools for sophisticated investors to manage daily trading risks.  They are designed to achieve their stated investment objectives on a daily basis, but their performance over longer periods of time can differ significantly from their stated daily objectives.  Investors should actively and frequently monitor their investments in the ETNs. Although we intend to list the ETNs on NYSE Arca, a trading market for the ETNs may not develop....MORE, including video