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VelocityShares Daily Inverse VI (XIV) Message Board

  • bryeager bryeager Dec 31, 2012 11:39 AM Flag

    XIV down today because of roll

    2nd month futures closed below 1st month on Friday (backwardated). That hurt XIV when the futures were rolled. It is usually the opposite (contango) which is why VXX and UVXY are terrible holds. Keep your eye on XIV.IV if you want to see its true value and compare that to its current price.

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    • Between Dec 28th and Dec 31st, both XIV and SVXY failed to follow the index that they track by about 5 percent. VXX did roughly track the same index with its usual small variation. If you haven’t read the prospectuses, all of these funds track the same index, VXX directly and the others inversely. The following data is percent change from close on 12/26/12. The last column is the index that the ETP’s track.

      Date SVXY XIV VXX SPVXSP.ID
      12/26/2012 - - - -
      12/27/2012 2.01% 1.82% -1.36% -1.76%
      12/28/2012 -13.24% -13.43% 13.09% 11.69%
      12/31/2012 2.40% 1.82% -7.52% -8.37%
      1/2/2013 13.10% 13.01% -17.07% -17.74%

      Notice that all the ETP’s are close to each other and relatively close to the index on 12/28/12. Then on 12/31/12 both SVXY and XIV deviate from VXX and the index by about 5 percent. This deviation continued through the yesterday’s close.

      Since I was long XIV during this time period I lost about 5 percent relative to being short VXX. If you look at the market caps of SVXY and XIV and factor by 5 percent, there seems to be about $25 million dollars missing. I hope someone from the media picks up on this to get some awareness going. Maybe the entities that provided the arbitrage prior to the 31st will pick it back up again like with TVIX last year. Until then people who were long SVXY and XIV from the 28th to the 31st are out 5 percent for no apparent reason.

      Additionally, I find it really puzzling that both the inverse funds (from two different companies) are deviating from the index, but are similar to one another.

      Any other thoughts?

    • THat is the only possible explanation

    • Not true, although I am still trying to figure out why given that futures' vix all dropped. First of all, it is not a monthly roll date. And second, even on dates that roll occurs and vix is backwardated, XIV does not automatically drop if vix on futures remain unchanged.

    • Not totally understood. Hope you are right. But we, the small holders, should keep on any illegal manipulation.

      • 2 Replies to chris2008fa
      • XIV is basically short VXX with a daily rebalance. So during times of large price swings in VXX, the makers of XIV are forced to cover high on up VXX days and short more low on down VXX days to keep the balance. All that selling low and buying high takes a bite out of NAV. You don't notice it on normal days... just on the these high anxiety days.

      • Yes. Very odd pricing action VXX vs XIV. First time I've seen this since following the two for a couple years. For this to happen last day of a calendar year.. and at no other time previously? That said, can't believe no one out there has suggested the possibility of capital gain tax selling. If such action has happened with other stocks here and there in December, why not with an ETN that has gained ~200% in 2012? For big money players who have held all year, wouldn't you want to take the tax hit this year rather than next with all the uncertainty and noise out there??

        If plausible, XIV could correct/ normalize from this one-day quirk early in the New Year.

 
XIV
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