As they say 'when everyone's buying that's the time to sell'
bloomberg:
Securities that usually gain value as the U.S. stock market gets calmer have never been more popular with investors. That concerns strategists at Deutsche Bank AG.
A combination of investor inflows and declining equity volatility has pushed the market value of the VelocityShares Daily Inverse VIX Short-Term ETN to about $1.2 billion and sent the ProShares Short VIX Short-Term Futures ETF (SVXY) to $564 million, data compiled by Bloomberg show. Both reached records last week.
Interest is building in the exchange-traded products as they recover from swoons that erased almost half their share price as markets buckled and the Standard & Poor’s 500 Index tumbled earlier this year. That could spell trouble, according to Rocky Fishman, an equity derivatives strategist at Deutsche Bank AG in New York. Another exodus could whipsaw traders and even exacerbate moves in the Chicago Board Options Exchange Volatility Index.
“The size of these short-volatility ETN products have come to be so gigantic,” Fishman, who is based in New York, said by phone. “People saw a lot of money being made on it, so there’s certainly the mentality out there that you’re at a better entry point now. The ’buy-the-dip’ mentality is being applied to the product and it shouldn't be.”
