iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
19,436 Blog Posts

Volatility ETFs Are Broken — $XIV Down 70% in After-Hours Catastrophe

UPDATE: What sort of ETF has a termination event that is triggered in the after-hours to absolutely FUCK everyone is owns it? Moreover, how many active managers just got caught with their pants down like me? It’s all fun and games until your fucking ETF goes to zero in the after-hours.

UPDATE: Apparently, there is a termination clause on these VIX products that permits underwriters to liquidate the product in the event of an 80% move in volatility, which would explain the selling. However, and I must admit, this is the worst ETF fuckery I’ve ever seen. I have 10% of my account in this, so I’m guessing I will lose 10% of my account by tomorrow.

NIKKEI futures are -8% now. Other than that, I have no idea how this is possible, but XIV is now trading at $38 in the after-hours, down from $100.

As you know, I am long XIV, even bought more on Friday at $120 — and now it’s down 70% in after hours trade — a move that I cannot explain. I just got back from ordering sushi. I turned on the teevee and saw XIV scrolling on the ticker. I thought this was the result of a reverse split. But then I looked at the long VIX products, and they’re all up 25-30%.

Redpill me on how this is even possible?

As it stands, this will represent my worst percentage loss of my life — an ironic end to a calm market that knew nothing but upside. The very tool that kept order and emotions in check has dislocated from reality, which could lead to a truly harrowing decline tomorrow.

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68 comments

  1. juice

    Data is chaotic now but key numbers show $VXX IV value at +96.10 % for the day and $SVXY IV down -96.67%. It’s likely $XIV & $SVXY terminated. If so their final values will be set by what value the futures were when they closed out their position. Likely at least down 80%.

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    • it is showtime

      AHH

      HAHAHAHHAHHAHAHHAHAHHAHAHHAHAHAHAHAHAHHAHHAHAHHH
      HAHAHAHHAHAHHAHHHAHAHAHHAHAHAHAHHAHAHAHHHAHAHHA
      AHHHAHAHHHAHHAHHAHAHHAHHHAAHHAHHA

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  2. WrongView

    The timing is unbelievable, almost.

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    • edge

      Suppose VelocityShares doesn’t want to liquidate. Sure would tarnish their brand, if anyone notices or cares.

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  3. numbersgame

    Well, you did say “God is a Patriots fan,” so I guess he is in a bad mood.

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  4. juice

    the machines have taken over … AI in action .. not good

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  5. tonka

    You were warned. These can gap to zero if futures move over 100%.

    Even gave you the equation the other day.

    Am I still speaking gibberish?

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    • Dr. Fly

      Hindsight is always 20/20. Get over yourself with the I told you sos.

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      • tonka

        Hindsight?!? LOL

        There is only one rule to follow and you chose to ignore it. Don’t short until after contango.

        This was childsplay.

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        • Dr. Fly

          So you *knew* XIV would trade from $120 to zero today?

          There’s a difference between saying it would go down and not exist at all. If you cannot grasp the fabric of this difference, go fuck your own face.

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          • tonka

            I knew it could go to zero

            I knew it would be liquidated at -80%

            I knew it would have to start at a very low vol level to be possible

            I knew most people didn’t know this

            Short vol is simple.
            1. Wait for contango while suffering FOMO.
            2. Short vol when contango is over.
            3. Try not to get blown up on the rare double dip.

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        • sarcrilege

          I remember your cryptic comment(s) a few days ago…wasnt sure what you were babbling about cuz that’s not my forte but yeah, one thing is theory and another is to act on it and plunk cash to do it. Did you?? Prolly not cuz if it went the other way, your ass would have been handed to you behind the woodshed, yes?

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          • tonka

            Short vol is very simple. Wait for the vol event to happen, then pick up the pieces afterwards.

            Doesn’t matter what happens during the event. Could go to VIX 40, could go to VIX 200. I don’t guess that. I just wait for it to happen.

            It is the only trade that you do not need to forecast to get right. You just have to deal with the FOMO waiting for it to happen.

            Guess I’ll be buying UVXY puts instead of SVXY outright.

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          • Dr. Fly

            What the fuck do you mean ‘short vol’ is simple, you fucking simpleton. It has been the absolute worst trade for a decade. I’d wager you have zero skin in the game and are merely talking out of your ass.

            You did not think it would trade to zero. Stop your fucking fat filthy mouth from saying so. You said it’d trade down. Great, you called a trade. Now fuck off and stop being a dick.

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          • sarcrilege

            @tonka, good for you if you did!!

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          • tonka

            I was blown up doing the same thing in 2011 when TVIX went up 900%.

            Luckily short vol offers incredible opportunities to make it all back up.

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  6. sarcrilege

    meh, just a scratch. a flesh wound at worst. no worries laddies. it’s just a paper loss. same as paper gain. nothing to worry about until you book it (looks at a LBMA gold bar collecting dust and used as a doorstop. nope. still the same size. no shrinkage there) 🙂

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  7. teslawasright

    Watch your parasite consumption. Take some Albendazole and Mebendazole from AllDayChemist online good sir!

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  8. juice

    the market maker will short these down to 80% of the close

    XIV is a lay-up to 20 or less

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  9. numbersgame

    VIX Futures settle Feb 15, so expect a bumpy ride for the next 2 weeks

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  10. stocksnblondes

    The good news is that all the degenerates will be wiped out, and the big boys can again reign over the stock markets.

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  11. jonnybegood2

    all of the vxx etf products are pieces of shit. always have been. just like USO and OIL and such. But that after hours shit is unreal. Wow.

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  12. edge

    When the markets go to shit you can keep quality, but sell junk.

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  13. og

    Crazy that a lot of people I follow were still buying it AH until they realized it might go to $0.

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    • oilerua

      anything can go to zero . there’s people traiding the bounce and gaining 3000$ . jfyi . someoneother sure is making a multiple of this .

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  14. stocksnblondes

    …and this is what you call a black swan.

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  15. stocksnblondes

    I don’t think it got triggered after hours–the ^VIX jumped 115% today. I think XIV and SVXY were just slow to react to that fact.

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  16. juice

    derivatives gone awry

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  17. ilostitall

    xiv and hodl on!

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    • edge

      Ha. Might as well, can’t sell it.

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      • fryguy15

        Actually, you can. The real bullshit is how does CS sell to some at $50 and others at $20? Kind of a big difference if your’re holding 20k shares.

        I’m sure those fucks we’re on the phone at the close telling their buddies to hit the exists at $90, or worse yet, get short at $90. This is some smelly bullshit.

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  18. fryguy15

    Damn! That is some serious bullshit. Fuckery on the grandest scale. Sorry to hear.. at least it’s only money.

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  19. Lyndon Keltner

    This is why I trade futures only.

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  20. kidstock

    Bought Ethereum @ $685…my first crypto purchase

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    • wolfdaddy

      After such a controlled sell off I highly doubt we have seen the crypo bottom. And I don’t expected quick SnapBack after these hodl idiots face their first ass raping

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  21. roundwego

    Moral Hazzard time.

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  22. edge

    Xiv is about a third Feb expiry, 2/3 March. Who knows.

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  23. joseph25

    $18.17, and dropping.

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  24. insp cluso to you
    insp cluso to you

    What happens if $VIX doesn’t open higher in the AM? Or FED does fuckery?

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  25. calculater

    I read the XIV prospectus. I think what is happening is called “Acceleration Event”:

    Acceleration Event: As discussed in more detail under “Specific Terms of the ETNs—Acceleration at Our Option or Upon an Acceleration Event”
    in this pricing supplement, an Acceleration Event includes any event that adversely affects our ability to hedge or our rights in
    connection with the ETNs, including, but not limited to, if the **Intraday Indicative Value is equal to or less than 20% of the
    prior day’s Closing Indicative Value. **

    Damn… so if XIV is 20% lower than the previous day’s close, then they have the option to do an “accelerated event” (i.e. liquidate)

    NOWHERE in the prospectus does it say anything about after-hours… just INTRA-DAY hours (Is intra-day == after-hours?) You may have something to go on here.

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  26. oilerua

    you have been naive as fuck man lately

    but you can afford loosing 10% of your account ( if half of the things you write is good or not a hype or a lie )

    on another note , I wouldnt be surprised at all that someone has been planning exactly this and was targeting this , for a nice gain

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  27. husaria

    Remember reading about manager of Target store , Florida I think, who made big $$$$ with inverse volatility ETF’s. If he did not sell, guess he just plain Target store manager again. Hope he got new red polo shirts.

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  28. edge

    80% in a day. A trading day?

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  29. ferd

    Gentlemen. On the off chance that the world doesn’t end …observe that oil is still hanging in in the middle $60s while XLE has done a 2/3s retrace from August lows to recent highs and is at Vol by Price support. Bought a couple of oil drillers and bought some XLE near today’s lows. Looking for others for tomorrow if oil continues to hang in.

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  30. edge

    +16! The righteousness of GAWD shall prevail!!!

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  31. it is showtime

    AHH

    HAHAHAHHAHHAHAHHAHAHHAHAHHAHAHAHAHAHAHHAHHAHAHHH
    HAHAHAHHAHAHHAHHHAHAHAHHAHAHAHAHHAHAHAHHHAHAHHA
    AHHHAHAHHHAHHAHHAHAHHAHHHAAHHAHHA

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    • edge

      Loser

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    • fryguy15

      The Dow dropped 1500 and this fucking clown missed it.

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    • numbersgame

      showtime,
      I’m in agreement that the market is built on dreams and QE, but I think you are celebrating too early. High yield barely moved, which means this is most likely a short term event.

      Of course, now that bulls realize that markets can go down, this will put a little fear in them. We’ll probably see another pop near Dow 25k, and then bulls better hope that the middle class spends that tax refund instead of saving it.

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      • sarcrilege

        agreed. this is just a 6-10% correction before back to all time high. This is a setup. Powell will hike rates. He’s the fall guy. The final crash will happen after this goy takes action. Pull it (extra Silvestein).

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  32. numbersgame

    Some notes from the XIV prospectus

    For XIV, here is the underlying index:
    https://finance.yahoo.com/quote/%5ESPVXSP?p=^SPVXSP

    Note that the “Daily Index Performance” is 96.12% This equates to XIV “Daily ETN Performance” of approximately -96%,

    “An ‘Acceleration Event’ means:

    (d) if, at any point, the Intraday Indicative Value is equal to or less than twenty percent (20%) of the prior day’s Closing Indicative Value;

    upon acceleration you will receive a cash payment in an amount (the “Accelerated
    Redemption Amount”) equal to the Closing Indicative Value on the Accelerated Valuation Date. ”

    The bad news is double: holders (as of today) of XIV will likely receive a cash payout of $4-5/share, and have no chance at any receovery tomorrow. XIV will not be trading tomorrow

    TBTF Credit Suisse FTW

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    • insp cluso to you
      insp cluso to you

      Can you say, or do you know why UVXY is now dropping in AH?

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      • numbersgame

        I shoudl emphasize that the above is based on **my personal read of the perspectus**. And some other commenters have called me an idiot, so waht do I know 🙂

        In tersm of UVXY, initially it rose AH (to $24+). Perhaps now people think volatility will calm down tomorrow.

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        • william_w

          It’s important to note that ETNs and ETFs are different. XIV is an ETN, while SVXY is an ETF. SVXY also does not have specific “80% down” language in the prospectus.

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  33. moneybagz

    401k went from +40% YoY to +34% YoY.

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  34. hugh hendry

    There is a delicious irony in how you were mocking “cryptofags” (as you termed them) for the fact their value could drop 60%. Mother market has a way of fucking those who get a little too flippant.

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  35. Angel of Death

    The Tylers over at ZH have been discussing this possibility for at least a year. Today it finally happened. Honestly, not surprised it happened. Timing it though was obviously next to impossible.

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