RIP TVIX: Saying Goodbye To A Volatility Legend

David Dierking

Last week marked the end for an investment product that had continued to grow in popularity even up until its final day trading on the major exchanges.

The VelocityShares Daily 2x VIX Short-Term ETN (TVIX) was officially delisted, effectively ending its run as a volatility-linked trading vehicle after nearly 10 years.

Earlier this year, TVIX eclipsed more than $1 billion in total assets and, for a brief moment, was the most added security on Robinhood.

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I wrote earlier about Credit Suisse's decision to sunset TVIX from its lineup (HERE and HERE) as well as the risks of trading it in its final days (HERE).

Why Is TVIX Closing?

The juicier part of the TVIX story is why the note is essentially being let go.

For those not familiar with ETNs, they're not that far from bonds in that their monthly payments are backed the issuer's credit profile and ability to pay them. In other words, Credit Suisse is on the hook for any payments as well as any unintended consequences that may occur if the markets go haywire.

European banks have been struggling for some time and I suspect that Credit Suisse is also in that boat. The bank generates tens of millions of dollars in fees annually from its ETN lineup, but also exposes itself to a lot of risk in the process.

My guess is that Credit Suisse decided it was better to reduce its risk exposure than continue collecting fees on these products.

For its part, Credit Suisse says that the ETNs are being closed to get better aligned with its long-term strategic goals - a fairly standard, generic response.

Investors still have options if they want to trade volatility. UVXY, SVXY, VXX and VIXY all remain viable options for investors.

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