Options Press

‘Short-volatility Armageddon’ craters a pair of Wall Street’s most popular trades, could roil market


Mark talks about the impact of a spike in volatility on XIV and VIX-centric funds.

From Marketwatch:

One of the most popular trades in the market, betting a period of unnatural calm would continue, may have amplified selling pressure in the stock market on Monday market participants said.

At least two products tied to volatility bets were severely whacked with the hemorrhaging that could pose challenges to the exchange-traded notes.

One popular product, the VelocityShares Daily Inverse VIX Short Term ETNXIV, -7.48% was down 90% in after-hours trade on Monday, following a session in which the Dow Jones Industrial DJIA, +0.82%  plunged by 1,175 points, or 4.6%, while the S&P 500 index SPX, +0.66% tumbled 4.1%—both benchmarks coughed up all of their gains for 2018.

The Cboe Volatility Index VIX, -17.38% meanwhile, skyrocketed by about 118%, marking its sharpest daily rise on record. The VIX uses bullish and bearish option bets on the S&P 500 to reflect expected volatility over the coming 30 days, and it typically rises as stocks fall.

The XIV, meanwhile, was designed to allow investors to bet against a rise in volatility and such bets had been a winning proposition until recently, when equities accelerated a multisession unraveling fueled by fears that the Federal Reserve will be forced to raise borrowing costs faster than anticipated due to a potential resurgence in inflation, which had pushed Treasury yields higher.

Monday’s stock-market drop may have been amplified because those making bets that volatility, as measured by the VIX, would remain relatively subdued, were caught wrong-footed.

“Moves in the VIX had XIV scrambling to cover,” said Mark Longo, CEO of Chicago-based research firm TheOptionsInsider.com.

Read more.



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The Options Insider Radio Network

The Options News Rundown

Your source for the most important news and information from the world of options.

The Options News Rundown

The Options Insider Radio Network

All of our radio programs in one convenient place.

The Options Insider Radio Network

Options Insider Radio

The original options podcast. Features interviews with leading options figures.

Options Insider Radio

The Option Block

This high-octane program features education, analysis, strategies and unusual activity.

The Option Block

Volatility Views

The premier radio program for volatility traders.

Volatility Views

The Long And Short Of Futures Options

Your source for futures options information.

The Long And Short Of Futures Options

The Advisor's Option

Arming advisors with the info necessary to manage risk.

The Advisor's Option

Options Boot Camp

Get into peak options trading shape.

Options Boot Camp

Options Insider Special Events

Compelling panel & special event recordings from the options world.

Options Insider Special Events

OIC's Wide World of Options

A dynamic mix of current events, investor resources, & strategy insights.

OIC's Wide World of Options

Trading Tech Talk

We break down all the amazing technology that takes your trades from the click of a mouse to the clearinghouse.

Trading Tech Talk

Options Playbook Radio

Break down cutting-edge options strategies and learn how to incorporate them into your portfolio

Options Playbook Radio

Options Oddities

We track all the unusual options trading activity on Options Oddities.

Options Oddities

This Week in Futures Options

The program designed to help active futures options traders stay on top of this ever-changing marketplace. 

This Week in Futures Options

The Business Show

If you like business, if you like humor, if you like stock symbols, this is the podcast for you.

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Options News Rundown: Monday, December 10, 2018

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Options News Rundown: Monday, December 10, 2018