(Reuters) - The price of a popular exchange-traded note that tracks stock market volatility has gotten out of sync with its underlying futures, evoking memories of a volatility surge that accompanied a stock market drop last year and cratered a similarly popular ETN.
Here are some facts about the ETN, known as TVIX:
- VelocityShares Daily 2x VIX Short-Term ETN are unsecured obligations issued by Credit Suisse designed to provide traders with the ability to gain exposure to volatility.
- The ETN is linked to the S&P 500 VIX Short-Term Futures Index and is meant to track twice the value of the underlying index.
- For the most part, TVIX trades like a stock and can be bought and sold as such.
- Unlike stocks, owning TVIX does not give you a share of a corporation.
- TVIX’s tendency to rise when stocks fall has made it popular with traders looking for short-term hedges.
- It is the largest VIX-linked exchange traded product.
- When TVIX’s price runs above its theoretical price suggested by underlying futures, large market players often sell it short and close their position using newly issued shares by Credit Suisse.
Reporting by Saqib Iqbal Ahmed; Editing by Leslie Adler