How to Invest When You Feel Really Good

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Nov. 1 (Bloomberg) -- Bloomberg's Eric Balchunas looks at how to play rising investor confidence with ETFs. He speaks with Adam Johnson on Bloomberg Television's "Street Smart." Cantor Fitzgerald's Peter Cecchini also comments. (Source: Bloomberg)

Looking at?

The inverse v.i.x. area is fascinating.

These products have gone on an epic 500% run in the past 23 months.

Not everyday anything returns 500%. are they levered?

No, they're inverse.

Plain inverse v.i.x. one-time inverse.

Velocity shares, v.i.x. short term, e.t.n., this is like shorting the first and second month of the v.i.x. futures.

Essentially they make it convenient.

They do this for you.

What you get is the opposite.

When we talk about v.x., the short-term futures, the problem is the role cost, which turns into role yields.

Generally later months are higher, so you have to roll up to the higher months.

And it eats away at your return.

This actually is roll yield.

You're actually picking that up, so that's why you have these astronomical returns.

You're getting the yield of 6.5% a month as it stands now.

When they don't do well, they really don't do well.

Last summer, in 2011, when the european debt crisis hit, this e.t.n. lost 65% in two months.

So it can go down quickly.

So it's definitely for the sophisticated investors.

They love it.

This thing trades more than mcdonald's. it's becoming a very popular product.

I've got to bring peter in for just a second on this.

You're a derivative guy.

Yes, we have had this run that he's talking about for this inverse v.i.x. product.

How long can that last ? it's been correlated with rallies we've seen in stocks.

Are people going to get more worried at some point?

One of the themes that i like to talk to our clients about is the relationship between liquidity and the financial markets and volatility.

When people feel like the financial markets are liquefied, fed policy largely, they tend to be slers of volatility.

They buy stocks and they're not all that concerned that they're going to get that big tail risk event.

So to me, again, the real key theme here is what happens with the fed.

That is certainly the key question.

Eric, our e.t.s. specialist.

Same time next friday.

Great, thank you.

This text has been automatically generated. It may not be 100% accurate.


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