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Indeed, you can't have a price that looks like XXX'32. XXX'32 = XXX+1'00

This too is kinda dumb... The guy runs a $20bn long only fund. He probably drew down arnd $2bn during the recent dump, but he's supposed to get excited over the $200mm VIX payoff?

What came first, the chicken or the egg burrito?

CS hedged the live stuff... The large bit retained wasn't really live, so it didn't need any hedges. And yes, my impression is that this is mostly a retail product. EDIT: correction: this WAS a retail product.

The large CS holding is not real, as it's just the stock they retained for liquidity...

Wasn't this the least aggressive of their 3 strategies? What happened to the "aggressive" strategy, I wonder...

Shareholders do cover company messes. In fact, shareholder's equity is the first thing that normally gets wiped out in an insolvency.

https://www.credit-suisse.com/corporate/en/articles/media-releases/credit-suisse-announces-event-acceleration-xiv-etn-201802.html

Yes, the owners would have needed to pay, I expect. We know that the issuer is not in the business of taking a view on volatility. The issuer's job is to collect their fees, manage the assets, all while being as flat risk as possible at every point in time. So, as I described on another...

The sponsor was hedged, so it's unlikely they would have eaten anything...

It's probably true... The extent of the "negative convexity" of ETP issuers was pretty well flagged, though, ahead of time.

Yeah, it's not that they're hedging XIV itself... They're, effectively, hedging their hedge, which will look increasingly nekkid as VIX goes up and XIV gets closer to the barrier. It's a pretty typical thing that happens with all the 1st generation exo stuff in FX. Just bigly short gamma.

They might restrike it, I suppose... The point of these teeny calls is that they're a hedge for an large long-only equity portfolio. Just 'cause VIX has spiked doesn't mean you don't need the hedges.

And this here is the absolute height of idiocy: http://www.businessinsider.com/vix-elephant-trader-returned-to-reap-gains-he-made-from-stock-chaos-2018-2 Apparently, being left naked short 250k+ March 25 calls is considered to be "taking profit". In fact, the Mammoth or the Elephant or...

Exited? Why would he necessarily exit?

Yeah, although I guess it depends on how they hedge exactly... Given the nature of this thing, I imagine they were probably pushing it, as VIX was going higher. It’s proper wrong-way risk for the XIV longs.

Nah, let's look at their exposure apart from the bit which they retain (32%, I think; which I guess doesn't need to be hedged, as it's not really live). They sell XIV to the end investor. End investor ends up short vol, whereas CS ends up long and then they hedge it by selling vol. So at a...

Probably not, but the bigly lesson here is to always read the prospectus... The devil is always in the details and there is never any free lunch.

*CREDIT SUISSE CONFIRMS IT EXPERIENCED NO TRADING LOSSES ON XIV It's a tough gig to be a XIV investor, as it clearly would suggest that CS "hedging" pushed their own instrument into liquidation.

Smth like that, I guess... As we discussed a while ago, it's bigly short vol of vol and I can't imagine it's having a good day today.