First, I am grateful for all the wisdom you have shared on the board!
Next, I need to glean a bit more from you…
I infer that you are a finance pro, and I’m hoping you can shed some light.
Most of us are aware of the Credit Suisse debacle in its handling of TVIX last year when it stopped supporting the note.
From the latest TVIX prospectus:
Additional ETNs of each series may be issued and sold from time to time through CSSU and one or more dealers at a price that is higher or lower than the stated principal amount, based on the indicative value of the ETNs of such series at that time. If there is a substantial demand for the ETNs, we may issue additional ETNs frequently. However, we are under no obligation to sell additional ETNs of any series at any time, and if we do sell additional ETNs of any series, we may limit or restrict such sales, and we may stop selling additional ETNs of such series at any time.
Any limitation or suspension on the issuance of the ETNs may materially and adversely affect the price and liquidity of the ETNs in the secondary market. Alternatively, the decrease in supply may cause an imbalance in the market supply and demand, which may cause the ETNs to trade at a premium over the indicative value of the ETNs. Any premium may be reduced or eliminated at any time. Paying a premium purchase price over the indicative value of the ETNs could lead to significant losses in the event the investor sells such ETNs at a
time when such premium is no longer present in the market place or such ETNs are accelerated (including at our option, which we have the discretion to do at any time), in which case investors will receive a cash payment in an amount equal to the Closing Indicative Value on the Accelerated Valuation Date (each as defined herein). Investors should consult their financial advisors before purchasing or selling the ETNs, especially for ETNs trading at a premium over their indicative value.
I entered the VIX ETP arena last October but have not been watching TVIX. Yesterday, morning I noted that there was a 5% market price premium to IV (intrinsic value). At close today (4.46 vs. 4.16) the premium has increase to a whopping 7%.
I don’t know if this product always trades at a premium. Is there a website that tracks premiums/discounts of securities to NAV’s on a daily basis???
If this premium is new, do you think that CS may again fail in its support and there might be another “run” on the note before it collapses?
Or is time to max out buying power and short away?
Or is this the safest arb of a lifetime: short TVIX and long UVXY until the premium melts away???