S&P 500 Dynamic VIX ETN Ipath (XVZ) Stand Above PSAR Line

09 February, 2018, 05:25 | Author: Barbara Daniel
  • iPath S&P 500 VIX Short Term Futures ETN (VXX) Stake Boosted by Gilder Gagnon Howe & Co. LLC

One of the most popular time frames using RSI is the 14-day.

The forced selling that results from position covering could drag USA equity markets lower for a third straight day on Tuesday.

Tilly was speaking on a conference call hosted by Cboe to address concerns around market volatility in the aftermath of Monday's historic hit to stocks.

Yet the popularity of these vehicles might have contributed to one of the most violent moves in US equities in history: one that saw the Dow Jones Industrial Average slump more than 6 percent in a span of six minutes.

NYSE Arca is adjusting the re-opening auction reference price for SVXY (ProShares Short VIX Short-Term Futures ETF) from the prior day's official closing price to the Intraday Indicative Value (as of 11:00am) of $11.4111.

According to research by Macro Risk Advisors (MRA), it meant that by the close of trade the combined value of XIV and SVXY had fallen from $US3 billion to just $US150 million. The ETN's market closing Monday was $99, but its closing indicative price as listed on the VelocityShares website was just $4.22. "There is no material impact to Credit Suisse", said spokeswoman Nicole Sharp.

When it comes to trading stocks, even veteran investors are prone to making mistakes. Finally, Bogart Wealth LLC purchased a new stake in shares of Credit Suisse AG - VelocityShares Daily Inverse VIX Short Term ETN in the second quarter valued at $304,000.

As of Monday night, the fate of SVXY was still up in the air.

At the time of writing, S&P 500 Dynamic VIX ETN Ipath (XVZ) has a 14-day Commodity Channel Index (CCI) of -180.02. As the value of the VIX contracts being shorted increases, the fund also becomes "more short" the VIX, a phenomenon which must be offset by reducing short holdings, which once again involves buying underlying VIX futures contracts.

In a note on Thursday, Bernstein analyst Noah Weisberger explained the two ways that these inverse volatility funds create feedback loops that drive volatility. Simply put, the ATR determines the volatility of a security over a given period of time, or the tendency of the security to move one direction or another. It serves as a measure of the S&P 500's future volatility, and its popularity led to the launch of products which hedged against it.

And he wasn't alone. "Frankly, it's a reason to think that some of the worst of the recent moves in the VIX and the delta moves in cash equities have been driven specifically by equity-vol products that have not spread out to other asset classes". He warned that a "sudden eruption" of volatility could leave traders "badly burned".

Janus Henderson Group plc, which markets the notes and owns the VelocityShares brand, did not respond to multiple requests for comment.

XIV's prospectus spelled out the risks of an investment in the ETN, saying a large decline could result in its closure, removal from the market and likely loss of all or a substantial part of the investment.

Derivatives markets indicated, however, that the spike in volatility of the past few days would not be sustained.


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