UVXY Dominates VIX ETPs By Dollar-Weighted Volume

At various times in the 13-year history of VIX ETPs there have been as many of 30+ different versions of these VIX-based products on the market.  Initially, it was the +1x VXX that dominated the space, later supplanted by the +2x TVIX and then the -1x XIV as the top dog.  All three of these products have run into various issues (see VIX ETPs – What Can Go Wrong?), with XIV dead, TVIX relegated to irrelevance and trading by appointment on the pink sheets as TVIXF and VXX currently wounded by regulatory issues (Barclays Suspends Creation Units for VXX).

In the wake of all this carnage, which products are still viable?  A month ago I would probably have argued that VXX was the most important product in the space, but with VXX’s creation unit troubles, the +1.5x UVXY ETF from ProShares is the clear market share leader, with 63.3% of the dollar-weighted volume in the VIX ETP product space.  The ProShares -0.5x SVXY ETF has the second highest dollar-weighted volume in the space at 19.4% and in third place at 9.8% is the +1.0x VIXY ETF.  VXX from Barclays has fallen to fourth place at 5.8%.  For now, the VIX ETP space is dominated by the ProShares product suite.  The two new kids on the block, the +2.0x UVIX and the -1.0x SVIX from Volatility Shares are gaining some traction, but still have only 0.7% dollar-weighted volume share.

In the graphic below I show the dollar-weighted volume as of yesterday’s data.  Note that the top six products all have a weighted-average maturity of one month while the two laggards, VIXM and VXZ, both have a weighted-average maturity of five months.

 [source(s):  Yahoo, VIX and More]

Further Reading:
UVIX and SVIX Join the VIX-Based ETP Landscape
VIX ETPs – What Can Go Wrong?
Successful Launch for SVIX and UVIX
VIX ETPs Flash Some Green in 2016
Every Single VIX ETP (Long and Short) Lost Money in 2015
Performance of VIX ETPs During the Recent Debt Ceiling Crisis
Expanded Performance of Volatility-Hedged and Related ETPs
Performance of Volatility-Hedged ETPs
Performance of VIX ETP Hedges in Current Selloff
Slicing and Dicing all 31 Flavors of the VIX ETPs
Charting the Assets of the Volatility-Based ETPs

For those who may be interested, you can always follow me on Twitter at @VIXandMore

Disclosure(s): net short VXX, UVIX and UVXY, net long SVIX at time of writing

 

Attempt at TVIXF Short Squeeze Fizzling Out

Amidst all of the market turmoil following the Reddit wallstreetbets efforts to put a massive short squeeze on the likes of GME, AMC, BBY, EXPR, KOSS, BB, etc., it was just a matter of time before this same short squeeze template was applied to ETPs.  On January 28^th, silver became a short squeeze target and the primary silver ETP, SLV, was suddenly in the crosshairs and trading volume spiked about 10x.

On Monday, the OTC remnant of the venerable TVIX ETN, delisted by Credit Suisse on July 12, 2020 and now trading under the TVIXF ticker, became the target of yet another copycat short squeeze effort.

Yesterday, Yacob Peterseil of Bloomberg summarized the developments in the TVIXF short squeeze attempt in the aptly titled, A Onetime Giant of Volatility Has Gone Haywire in OTC Trading.  Peterseil noted that only 7% of TVIXF’s outstanding shares have been sold short, which dramatically limits the potential success for a short squeeze.  In the article, I am quoted as not being surprised that an attempt was made to squeeze the TVIXF shorts given the success of previous short squeeze efforts, but I also note that an effort to squeeze the shorts is very risky for longs in that the last time there was a similar undertaking, Credit Suisse declared an acceleration event and crushed the longs.  It is the risk of an acceleration event that forces the price to the indicative value (IV) – a feature that is unique to ETPs and does not apply to single stocks – that makes shorting ETPs much riskier.

The historical reference above is to DGAZF, which went from about 400 to about 25,000 in one week during a short squeeze in August 2020 when the indicative value was near 200.  The decoupling of the market price on the OTC from indicative value was in large part due to the cessation of the ability to generate new creation units and thus the ability to use shorts to arbitrage any difference between the market price and indicative value.  With large losses incurred by investors and the associated bad publicity, Credit Suisse elected to accelerate DGAZF.   As noted above, the acceleration of the note was executed at the indicative value price, not the market price:  “As described in the Pricing Supplement, investors will receive a cash payment per ETN equal to the arithmetic average of the closing indicative values of the ETNs during the accelerated valuation period.”  As a result of the acceleration to the indicative value, investors who saw DGAZF trade at 125x its indicative value were exposed to a 99.2% loss.

Not surprisingly, the TVIX prospectus and pricing supplement has essentially the same language regarding acceleration at indicative value as DGAZ, with the pricing supplement noting no less than a dozen times that in an acceleration event, the redemption price reverts to indicative value rather than the market price. 

If some of this talk of short squeezes, premium to indicative value and suspension of creation units sounds familiar, this is not the first time it has happened to TVIX.  I covered the initial instance of the suspension of creation units in TVIX at length back in 2012, when most investors were still not familiar with the intricacies of indicative value, creation units, the potential for short squeezes and the potential for market prices to decouple dramatically from indicative value.

In the graphic below, I show the recent uncoupling of TVIXF from TVIX.IV (TVIX’s indicative value) and the premium that has developed as a result of the short squeeze peaking at 44% on Monday and falling back to 29% as of today.  The key takeaway for longs is that at any point in time, Credit Suisse can do as they did with DGAZF and declare an accelerating event, forcing the distorted OTC market price back down to indicative value in a hurry.

[source(s):  Yahoo, VIX and More]

Further Reading:
The Resurrection of TVIX
TVIX Premium to Indicative Value Creeping Back Up
TVIX Creation Units Return; What It Means for Investors
Is TVIX Now Just a More Docile UVXY?
Recent TVIX Volume and VIX Futures Volume
The Story of VIX ETPs Relative to their Intraday Indicative Values
The Ups and Downs of the New Premium in TVIX
Credit Suisse Suspends Creation Units in TVIX: What it Means
Four Key Drivers of the Price of TVIX
Will TVIX Go to Zero?
TVIX Topples VXX as Highest Volume VIX ETP
Who Is Trading TVIX?
Volatility Becomes Unhinged on Friday
TVIX Finally Getting Its Due As Day Trading Rocket Fuel
TVIX Trades One Million Shares for First Time
All About UVXY

For those who may be interested, you can always follow me on Twitter at @VIXandMore

Disclosure(s): none

Updating the Current VIX-Based ETP Landscape

There is a lot going on in the markets, with several themes weighing on volatility or the potential for more volatility.  COVID-19 cases are spiking to new highs in Europe and the U.S. and could be at an inflection point in the U.S.  Election uncertainty is also unnerving investors with the election only nine days away.  Lasts and not least, markets are strongly influenced by the Pelosi-Mnuchin stimulus dance, which appears to have migrated from a tango to a polka – but at least the music is still playing.

In the time since I was a regular contributor in this space, a lot has happened in the volatility world and the VIX ETP space has also changed dramatically.  For this reason, it seems like a good time to update a favored VIX ETP graphic to reflect the many products that have closed, matured and been moved to the pink sheets.  In keeping with tradition (this graphic has been published many times in various incarnations since 2010), I have plotted all of the VIX ETPs with respect to their target maturity (X-axis) and leverage (Y-axis).

It has taken more a decade, but the bottom line is that the VIX ETP space has essentially been narrowed down to two dominant products:

VXX (iPath Series B S&P 500 VIX Short-Term Futures ETN) – the pioneering +1 long volatility ETN that launched back on January 30, 2009 and has been the dominant product in the VIX ETP space throughout its lifetime

UVXY (ProShares Ultra VIX Short-Term Futures ETF) – the +1.5x ETF that spent most of its life as a +2x product and moved to +1.5x following the February 2018 Volmageddon event which resulted in the termination of XIV

Both VXX and UVXY trade an average of over 30 million shares per day and both are regularly in the top 5-10 highest volume ETPs as well as ETP options volume leaders.  The remaining VIX ETPs have been largely relegated to niche product status.  Additionally, Credit Suisse delisted and suspended its VelocityShares ETNs, meaning that the former TVIX, VIIX and ZIV now trade in the OTC market under the symbols TVIXF, VIIXF and ZIVZF.  For this reason and because of low liquidity and the increased risk with trading on the OTC “pink sheets.” I have highlighted these tickers in red.

[source(s):  VIX and More]

Further Reading:
VIX ETPs Flash Some Green in 2016
Every Single VIX ETP (Long and Short) Lost Money in 2015
Performance of VIX ETPs During the Recent Debt Ceiling Crisis
Expanded Performance of Volatility-Hedged and Related ETPs
Performance of Volatility-Hedged ETPs
Performance of VIX ETP Hedges in Current Selloff
Slicing and Dicing all 31 Flavors of the VIX ETPs
Charting the Assets of the Volatility-Based ETPs

For those who may be interested, you can always follow me on Twitter at @VIXandMore

Disclosure(s): net short VXX and UVXY at time of writing