Florida Man Who Raised $100 Million To Short The VIX Likely Returning To Old Job At Target

[comagnum]

"the problem for Seth and his ilk was that thanks to provisions they most likely didn’t care to read, some of those products had what amount to knock-out clauses that allowed the issuer to simply redeem those fuckers in the event things went too wrong, too fast.."

https://heisenbergreport.com/2018/0...n-after-xiv-blowup-bets-600000-vix-will-fall/

VIX traders shorting volatility

 

[stevegee58]

This failed scheme is similar to the Swissy Peg that imploded back in 2015. I wouldn't touch it with a 10 foot pole but I knew some guys who thought they had a license to print money. Until the the day the Swiss dropped the Euro peg.

 

[lawrence-lugar]

I knew some guys who thought they had a license to print money.

...We are gonna make... So, much... money,"

'Position yourself inside of an information curve'...
it kind of sounds like he's describing technical analysis. The trend is your friend.

 

[1a2b3cppp]

Then VIX is that thing that spikes up but never goes to zero right? Just buy it and sell the spikes.

 

[1a2b3cppp]

Do they have options on it? Go long your entire portfolio.

 

[JackRab]

Typically I'd agree with this 100%, but this isn't one of those cases. Even fully understanding the prospectus, there's a hard wired gap in human perception of risk vs. perception of reward. No amount of disclosure will get past this.

Also, making this an ETN gives the illusion of a zero-value point where losses end. They do in absolute terms because CS retains the risk beyond that. But the problem is it looks like the scale goes from 0-115, and risk is perceived as a percentage of that, where in reality there's no reason the underlying assets couldn't get to -100 as a nav value or even lower. So the range of values to calculate risk as a percentage of might better be -100 to + 115. And suddenly the 80% termination event becomes 50%...

I agree, but for someone with his dayjob being a manager at a local discount department store (Target) to trade other peoples money, total of 4 mln, putting it all on black/short vol at levels that are the lowest of the past 10 years... that's stupidity.

 

[vanzandt]

I agree, but for someone with his dayjob being a manager at a local discount department store (Target) to trade other peoples money, total of 4 mln, putting it all on black/short vol at levels that are the lowest of the past 10 years... that's stupidity.

Didn't Marsman say he worked at TGT?

 

[beerntrading]

I agree, but for someone with his dayjob being a manager at a local discount department store (Target) to trade other peoples money, total of 4 mln, putting it all on black/short vol... that's stupidity.

No one is arguing with that! That's diversity 101.

My problem is with the specific risk disclosure on XIV (and similar products). Even fully understood by professionals, I doubt risk is perceived appropriately on these products.

 

[JackRab]

No one is arguing with that! That's diversity 101.

My problem is with the specific risk disclosure on XIV (and similar products). Even fully understood by professionals, I doubt risk is perceived appropriately on these products.

Yes... but I think the majority of people that now trade these things have no understanding of even the underlying. The number of times I see people questioning the moves in XIV etc compared to the VIX index, while they should look at the futures...

People just dive into things that are hot, without understanding the basics... not even talking about the details in the prospectus. They all think it's a get rich quick or get rich easy thing...

The saying goes: "no risk, no glory"... but it's also the other way: "no glory without the appropriate risk".

 

[beerntrading]

People just dive into things that are hot, without understanding the basics

That's the problem here. The "basics" of the vix are anything but. My problem is the ETN gives the appearance of safety that you get from a stock or ETF (I mean, I've pushed buy on a chart when I caught the move before ever knowing what the company was). But in reality, you're unleashing the risk of a complicated futures contact (complicated even by futures standards!!!) on retail, naked and short...and to people who may not have been extended this ability by their broker precisely because of the risk.

The obvious counter argument to this is that it's an institutional tool for hedging, that should not be denied to retail....to which I say, institutional can hedge directly with the futures contracts anyway, and retail too. Then at least there's a facade of understanding of the risk involved. I wonder how many XIV-ers would have 'owned' the equivalent position if they had to do the futures spread themselves and saw what that short really was.