Horizons ETFs Management (Canada) Inc - BetaPro S&P 500 VIX Short-Term Futures Daily Inverse ETF Class A BTTPF

RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Titanic Economics

[dm27427]

Today's closing price is $2.20
NAV is $2.19
The fund manager's warning related to a scenario where the price becomes "unhinged" from the NAV, i.e. is significantly higher than the NAV, incorporating a premium valuation not supported by the underlying asset, i.e. the fund's cash holdings. As of today, with HVI, that is not the case.
Google TVIX 2012 for an old example of a fund (actually TVIX was an ETN) where the sponsor declared that no new units would be created. The market price rose significantly above the NAV (or indicative value as it was an ETN) before crashing hard.
There are three (or at least that's all I can think of) scenarios to consider:
1. HVI trades "normally" and maintains a close correlation between NAV and price (hopefully appreciating in value due to a VIX futures curve in moderate contango)
2. a second "black swan" event occurs and we say "oh $hit! - why didn't I get out of this @#$% fund"
3. price outstrips NAV and keeps rising. This is the scenario the fund manager's note warned about. Trading at that point is on a "greater fool" basis and anyone who owns would be advised to take the money and run. Of course, "I'll sell tomorrow" greed fever might affect our judgement.