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Inverse volatility ETFS may be TERMINATED, may cause big sell-off


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#1 dTraderB

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Posted 05 February 2018 - 09:26 PM

Massive declines in these as the "sure" SHORT VOLATILITY trade blew up. 

 

"What appears to be contributing to the dramatic losses in inverse volatility ETFs SVXY and XIV are concerns about possible termination events associated with an outsized move in the VIX futures.

  • XIV appears to have a termination event clause in its prospectus related to a move of more than 80% in a single day. So far, I have not come across anything indicating a similar trigger in SVXY.
  • Also, not sure if the trigger includes after hours movement. Still digging into it.
  • SVXY trading at $16.20 and XIV trading at $16.00 in after hours."

https://www.cnbc.com...tes/?symbol=XIV

https://www.cnbc.com...es/?symbol=svxy

Cramer: This security going 'haywire' after hours is going to pressure the whole stock market on Tuesday
  • The XIV — an obscure exchange-traded note that bets against market volatility — tanked more than 80 percent in after-hours trading.
  • "It is blowing up as we speak," Jim Cramer says.
  • "It should put downward pressure on the stock market at the opening, should spike the VIX to 50 and then cause the market to go down," he says.

https://www.cnbc.com...ff-tuesday.html

 

ASIA down big, wild moves in the stock index futures

 



#2 cycletimer

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Posted 05 February 2018 - 09:40 PM

Expect a Lehman Bro’s/Bear Sterns-type selloff tomorrow, probably the panic low for this move down. XIV is liquidating and Credit Suisse owns 5 million shares outright according to a recent filing. Ouch!
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#3 dTraderB

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Posted 05 February 2018 - 09:46 PM

 

Another possibility is that the big jump in $VIX futures was due to the short vol funds $XIV $SVXY) trying to get a jump on their huge rebalancing needs before close. They needed to cover hundred of millions in short positions even before things got really bad.

https://www.wsj.com/...mise-1517883143

 

Another possibility is that the big jump in $VIX futures was due to the short vol funds $XIV $SVXY) trying to get a jump on their huge rebalancing needs before close. They needed to cover hundred of millions in short positions even before things got really bad.



#4 tommyt

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Posted 05 February 2018 - 11:38 PM

Supposedly SVXY does not have a termination clause but XIV does...at least thats what I heard and read bits. These VIX type products are mysterious as no one really seems to know exactly how they work. Swiss is a big player/holder in these, and  said after the close that the drop in these would not have a material effect on their earnings :-) The excess in this bull market was people shorting volatility and now its getting purged, almost all of it. They will take just about every last player out on another big spike up, then its all good :-) Margin selling coming tomorrow, another ride south coming, hard for support areas to mean much with overthrow spikes. I've been waiting and will be in there buying on another 1000 pts down.  I'm sure Chief will buy the low tick.



#5 redfoliage2

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Posted 06 February 2018 - 05:03 PM

XIV lost more than 90% in its price in just one day.  It looks that it may not open for trading anytime soon as VIX is still high.