Dallas, Texas 08/04/2014 (FINANCIALSTRENDS) – Credit Suisse AG – VelocityShares Daily 2x VIX Short Term ETN (NASDAQ:TVIX) and others has in the last week of July, been at the receiving end of major criticism by expert Robert Whaley, of Vanderbilt.
Whaley criticised Credit Suisse AG – VelocityShares Daily 2x VIX Short Term ETN (NASDAQ:TVIX) and others such as VXX, UVXY as the reason for the volatility related trading due to these products, among others in this segment.
Often called ‘father of fear Index,’ Whaley’s blow-down of VXX ETN was down rated by S&P Dow Jones official statement. The spokesman countered the negativism, stated that, “The S&P 500 VIX Short-Term Futures Index is a robust, transparent, and fair index.” The structure of the index as a daily roll mechanism allowed for the lowering of trading concentration, the statement countered.
VIX Sophisticated Investments
The spokesperson clarified that, “Unlike equity indices, VIX futures are not in the long-term expected to deliver positive returns. VIX futures are not guaranteed to go down either.” The statement noted that for a long time VIX futures has been delivering over and above estimations. The key aspect remained that Credit Suisse AG – VelocityShares Daily 2x VIX Short Term and others indices matched the performance expected of the line of investment or strategy proposed at the time of launch.
Cotango ‘Natural Feature’
Whaley’s criticism was on the aspect of contango and the spokesperson clarified that, “Contango is a natural feature of any futures market. Therefore he who would take a long position in VIX must occasionally bear the cost of contango.”
S&P spokesperson reiterated that the prices of VIX are only inferred from S&P 500 options as by VIX cannot be directly observed.