Citigroup, Inc. C-Tracks ETN Steps It Up (NYSE:C), (NYSE:CVOL), (NYSE:VXX)

In Citigroup Belly-Flops into the ETP Sponsor Pool, Ron Rowland had some harsh criticism for Citigroup, Inc. (NYSE:C) seemingly stealth launch of the C-Tracks ETN on CVOL (NYSE:CVOL) earlier this month.

I am glad to report that Citigroup (NYSE:C) now has a nifty new web site devoted to (NYSE:CVOL) (see graphic below) that includes the prospectus, historical closing prices, a list of the factors and values that are inputs into the CVOL daily calculation (nice!) as well as a description of key risks and key terms and an attractive little charting module. In other words, Citigroup has stepped up to the plate in a big way here.

…and I’m excited that they have done so because I think CVOL has a great deal of potential. I will get into this in more detail in future posts, but essentially this ETN has chosen a much flatter part of the VIX futures term structure than the iPath S&P 500 VIX Short-Term Futures ETN (NYSE:VXX) and is using 2x leverage to account for the fact that in the 3-4 month VIX futures maturities, volatility tends to move more gradually on a day to day basis than it does in the cash/spot VIX or in the front month VIX futures. Eventually, I think investors will warm up to this tradeoff, but until CVOL has a sufficient track record to convince some investors that in some respects CVOL has some advantages to (NYSE:VXX), I would expect adoption to be gradual.

So far the volume in CVOL has been low and the spreads have been very wide (often as high as 1%), but as soon as these spreads start to narrow and volume picks up, I expect to be an active trader in CVOL.

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[graphic: Citigroup]

Written By Bill Luby From The VIX and More   Disclosure(s): short VXX at time of writing

Bill is a private investor who also authors the VIX and More ( blog and an investment newsletter from just north of San Francisco. His research and trading interests focus on volatility, market sentiment, technical analysis, and ETFs. Prior to becoming a full-time investor, Bill was a business strategy consultant for two decades and advised clients across a broad range of industries on issues such as strategy formulation, strategy implementation, and metrics. When not trading or blogging, he can often be found running, hiking, and kayaking in Northern California. Bill has a BA from Stanford University and an MBA from Carnegie-Mellon University.

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