XIV and SVXY: possible liquidation by issuer

m22au · Feb 6, 2018

SVXY

"ProShare Advisors Statement on ProShares Short VIX Short-Term Futures ETF"
www.businesswire.com/news/home/20180206005856/en/ProShare-Advisors-Statement-ProShares-Short-VIX-Short-Term

"We expect the fund to be open for trading today and we intend to continue to manage the fund as usual. "

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leftythrowinginside · Feb 6, 2018

If this rally holds (yes it's early, just the open), did Credit Suisse just do the ultimate bottom tick stop out? yikes.

sss12 · Feb 6, 2018

leftythrowinginside said:
If this rally holds (yes it's early, just the open), did Credit Suisse just do the ultimate bottom tick stop out? yikes.

Maybe, but I don't think CS really cares. Outside of the management fee what did they lose ? Their stake (which I believe was the original from the creation of the product) should be hedged.

Obviously, shareholders of the product have a different view. But even so, isn't it a daily reset ? So even with vol dropping back down the shareholder has little capital left to work with.

Martinghoul · Feb 6, 2018

*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.

sss12 · Feb 6, 2018

Martinghoul said:
*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.

gotta look out for #1.

jimmyjazz · Feb 6, 2018

SVXY is trading again. I was getting worried -- I bought some puts as a hedge late in the day yesterday and when they halted trading I was just sure they were going to liquidate and tell me to pound sand. Fortunately that didn't happen. Bought for $12 and sold for just under $67. Saved my ass.

newwurldmn · Feb 6, 2018

Martinghoul said:
*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.

Wouldn't CS be selling vol as a hedge to their XIV?

sss12 · Feb 6, 2018

newwurldmn said:
Wouldn't CS be selling vol as a hedge to their XIV?

jimmyjazz said:
SVXY is trading again. I was getting worried -- I bought some puts as a hedge late in the day yesterday and when they halted trading I was just sure they were going to liquidate and tell me to pound sand. Fortunately that didn't happen. Bought for $12 and sold for just under $67. Saved my ass.

nice trade.

sss12 · Feb 6, 2018

newwurldmn said:
Wouldn't CS be selling vol as a hedge to their XIV?

I think they have to buy it to be able to short it out (?). someone else can jump in here....

jimmyjazz · Feb 6, 2018

Thanks. By "saved my ass" what I really mean is "I shouldn't have started legging into long-dated SVXY calls yesterday but I did and just got a really bad feeling towards the end of the day, so I delta hedged with weekly puts".

Essentially, I was in a long straddle with different expiries. When they halted I figured liquidation would wipe out both sides, even though I saw claims that the OCC would force them to pay out on long puts.