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iPath S&P 500 VIX ST Futures ETN Message Board

  • golftheband_onemanshow golftheband_onemanshow Feb 9, 2013 6:41 PM Flag

    XIV prospectus says XIV will go to 0. Anyone with a PhD in math who can figure this out?

    It doesn't sound right. How can it go to 0 with contango all the time?

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    • Keep in mind that the prospectus can not assume contango in all cases (all though we know it is more likely than backwardization, it is not a guarantee.)

      Further, think about the case where the index round trips from 1500 to 2000 to 1500 over 2 days and what the resulting NAV impact is on the inverse funds. Because the daily returns are used to determine the impact on NAV, and gains will generally be a greater percentage than losses (as it was said before, a 105% gain is probable (maybe at .000001, but still probable), but losses are capped at 100% - if you're short, you can not have a daily 105% gain). Index round tripping can adversly affect the return of a inverse fund which is reset daily.

      Put another way, leverage changes relative to the futures contracts on index movements (see Ps-40 and Ps-41 of the prospectus for the disclaimer).

      The same round trip does not affect the NAV of a single-weighted long like VXX, but also affects the 2x funds.

      Look at the short-term impacts from 1/29 to 2/8 - the index is basically flat but it's movement up/down has caused a flat VXX NAV but XIV has lost about 1% of NAV. This would be even more severe on extreme movements. The return was in total negative from 12/11 to 1/3 on an index basis, but XIV lost over 5% on the year-end spike.

    • Just watch the futures (and spot). If spot is less than front month, and front month is less than second month, then XIV/SVXY go up over time. If the relation changes,then sell & move to the side-lines, until return. Front month expires at spot (give or take a slight premium or discount). It does not take a PhD to figure that out, and most of them are Pathetically Hopelessly Determined, and not post hole diggers,,,have worked with many from that lot.

      Sentiment: Sell

    • During a bear market, xiv will kill you!!!

    • These instruments are designed for short term trading dude. If vxx goes up 40% in one day, xiv will drop 40%. From August 2011 to Sept 2011 tvix went from 15-109 while xiv went from 20 to 5 during that period. Both xiv ,and tvix ended the year in red.

    • I am willing to bet noone can explain this. A couple of months ago it was proposed that a few thousand dollars invested in XIV would be worth millions in 10 years. Think that was suggested by mistermandaly.

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