If you’re a holder of VelocityShares 2x Long VIX Short Term Exchange Traded Notes (“TVIX”), managed by Credit Suisse Group AG, you’re all too aware that TVIX recently plunged off a cliff. But you may not have understood exactly what you owned, how it was supposed to work, or how risky it could be.
The note is linked to the Chicago Board Options Exchange Volatility Index, or VIX, and is designed to track stock-market volatility. The VIX index, which is based on options prices, can experience huge swings, and the Credit Suisse TVIX was designed to provide double that volatility. In other words, investors who own TVIX are supposed to make or lose twice as much as the daily move in the VIX.
Late last month, TVIX dropped 60% in a two day period. Yet this huge decline in the Credit Suisse product wasn’t accompanied by any significant change in market volatility. Complicated theories about what happened and whether it was Credit Suisse’s fault are being discussed around the web, but the SEC and at least one state regulator are investigating.
If you want to know more about the problems with leveraged and inverse investments like this one, take a look at our March 6, 2012 blog entry: Leveraged and Inverse ETFs. We’ll simply note that these things are incredibly complex, not meant to be held much longer than a day, carry tremendous risk, and are utterly unsuitable for 99.9% of average investors. Brokers who sell them to such investors are guilty of gross misconduct.
If you’re an investor who suffered losses after being sold TVIX or any similar leveraged or inverse product, we invite you to contact us to discuss your situation. We’re confident we can help you. We’ll provide a thorough preliminary analysis of your case at no charge. If we decide you have a valid case and agree to represent you, you can proceed confident in the knowledge that you’ll either recover money or you’ll owe us nothing but your out-of-pocket costs. We don’t earn attorneys’ fees if you don’t recover. That’s why we say, “Your broker will pay. We’ll bet our fee on it.”
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