*****Official VIX Exchange Traded Products thread******

I would not want to be long XIV right now. Short vol is so overcrowded that very small down moves are going to create disproportionate moves in all the related vol products.
 
Maverick74 said:
I would not want to be long XIV right now. Short vol is so overcrowded that very small down moves are going to create disproportionate moves in all the related vol products.
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I agree. And the rally in vol will beget more buying as all the short skew guys start getting shorter vol.
 
ajensen said:
Being long XIV recently has been very painful. The VIX futures curve has been in contango, although now it is almost flat between June and July. Usually XIV has done well when there is contango. With SPY down 0.5%, XIV down 11.7% is an outsize move. Are people who are short VIX futures (either directly or through exchange-traded notes) being forced to cover?
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According to Bloomberg
http://www.bloomberg.com/news/artic...-products-are-making-volatility-more-volatile "Exchange-Traded Products Are Making Volatility More Volatile":

Exchange-Traded Products Are Making Volatility More Volatile
Luke Kawa
Bloomberg
June 14, 2016

Though far from the sole cause, part of the reason for Monday's outsized move was massive demand for VIX futures from leveraged exchange-traded products that offer exposure to changes in implied volatility, according to Macro Risk Advisors Head Derivatives Strategist Pravit Chintawongvanich.

"Leveraged VIX exchange-traded products need to buy VIX futures on days when they are up, and sell VIX futures on days when they are down, creating a ‘short gamma’ effect," he explained. "The larger the move, the more they need to trade. This can lead to a vicious cycle where a spike in volatility leads to anticipatory buying ahead of the VIX ETP rebalance, in turn pushing up VIX futures and causing a bigger rebalance."

VIX ETPs were forced to buy 42,400 VIX futures on Monday, Chintawongvanich wrote, their largest rebalancing in history:
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http://www.bloomberg.com/news/artic...-in-notes-as-5-days-of-stress-sets-etn-record

VIX Volume Explodes in Notes as 5 Days of Stress Sets ETN Record
Bloomberg
Lu Wang
June 17, 2016

The worst market contortions since February are making stars out of once-obscure exchange-traded notes tied to equity volatility.

Trading in five of the most popular securities linked to moves in the Chicago Board Options Exchange Volatility Index surged to more than 4 percent of total U.S. stock volume in the last four days, a level that before this week had never been reached once, according to data compiled by Bloomberg.
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I have a trading system that can go long or short XIV but which is usually long. Today around near the close I wanted to short a lot of XIV, but Interactive Brokers said there were none available to borrow. By the time I submitted the equivalent long VXX trade, it was past 4pm and the market was closed. Since the close VXX is up about 1.4%. Darn.

I have shorted XIV without issue in the past, but I have learned that if you want to be sure of putting on a long VIX futures equivalent position, you should buy VXX or VIX futures. There is a chance that you won't be able to short XIV in a wild market.
 
ajensen said:
I have a trading system that can go long or short XIV but which is usually long. Today around near the close I wanted to short a lot of XIV, but Interactive Brokers said there were none available to borrow. By the time I submitted the equivalent long VXX trade, it was past 4pm and the market was closed. Since the close VXX is up about 1.4%. Darn.

I have shorted XIV without issue in the past, but I have learned that if you want to be sure of putting on a long VIX futures equivalent position, you should buy VXX or VIX futures. There is a chance that you won't be able to short XIV in a wild market.
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The IB site now has a message box next to the XIV symbol which says

"The SEC Rule 201 (aka "Up-Tick Rule") has been triggered and the related exchanges have implemented a short sale restriction in accordance with their policies. Short selling is still permitted when the SEC Rule 201 criteria are met. Short sale restriction is in effect from Jun 24, 09:30 to Jun 27, 20:00 EST."

So no further short selling of XIV until Tuesday I think. From the SEC site https://www.sec.gov/divisions/marketreg/rule201faq.htm I see

"Rule 201 requires that a trading center establish, maintain, and enforce written policies and procedures reasonably designed to prevent the execution or display of a short sale order of a covered security at a price that is less than or equal to the current national best bid if the price of that covered security decreases by 10% or more from the covered security’s closing price as of the end of regular trading hours on the prior day. Once the circuit breaker in Rule 201 has been triggered, the price test restriction will apply to short sale orders in that security for the remainder of the day and the following day, unless an exception applies."
 
Today SPY fell 1.74% from the previous close but XIV was down only 2.45% (its beta to the SPY is about 4 on average), but in after hours trading as of 4:45 PM XIV is down 5.31% since today's close while SPY is down only 0.40%. Any thoughts on why? Just a delayed reaction to the SPY move today?
 
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