I’m waiting for someone to comment on this talking about a “gamma squeeze” without knowing what an authorized participant is 
https://twitter.com/iv_technicals/status/1360359579876528128 …
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sell for a profit (at the higher-than-NAV price). The AP activity (buying VIX futs, selling UVXY) pushes up the prices of VIX futures and pushes down the price of UVXY but because UVXY started off at a premium, the net effect is that the prices of both VIX futures and
UVXY are higher than they were before the process started. Demand for ETN shares pushes up the price of the constituents in exactly the same way that demand for ETF shares pushes up the price of the constituents (or demand for stocks increases stock prices etc)
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Very interesting, any opinion on this comment? Tho a bunch of bids to UVXY could change things, it may not be a very efficient way to do sohttps://twitter.com/MinvstrD/status/1360477273959333890?s=20 …
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There are two things in play here — 1. demand for UVXY/VXX can push up prices for VIX futures 2. mechanical buying of VIX futures by UVXY, whenever they rise in price, to maintain its 1.5x leverage. So it is in theory possible to create a self-perpetuating momentum effect here...
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Few things, the share creation process doesn’t make this as reflexive, the APs soaking to move it to the value kinda stops that dynamic + APs aren’t forced to keep that matched book the same way MMs are. It’s a completely different dynamic.
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Just think about what happens when 1 unit of UVXY is bought and you go through an AP share creation cycle. The original purchase of UVXY nets out because the AP sells a share, so no impact there. You are left with a purchase of 1.5x VIX futures, that is what causes px to go up.
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