Weekend Reads: Shock, VIX, and Volatility

A day after doubling in the biggest run-up in its history, the VIX swung from 50 and back to 25, triggering price volatility halts in a number of ETFs and ETNs linked to the gauge as the market awaits further news.

More Than a Dozen Volatility-Pegged Products Have Been Halted – (Bloomberg)


Here is our completely unofficial listing of several volatility trading firms, via both VIX and index options, and how they have fared thus far in February.

VIX Traders See Feb Returns From +30% to -95% — (RCM’s Attain Alternatives Blog)


I’m going to be upfront here: I chose this particular question because I thought it would be kind of fun to troll some rocket scientists. I figured that asking them this question would be like asking a bunch of engineers about the number of cats that would be required to build the Verrazano-Narrows Bridge.

How Much Sugar Would It Take To Get A Rocket To The Moon? – (FiveThirtyEight)


Meanwhile, mutual funds such as LJM which trade volatility the old fashioned way – with options – saw much the same fate, failing to strike a NAV for two agonizing days before finally showing a loss of -82% on nearly $800 million.

The Tail Has Wagged the Dog – (RCM’s Attain Alternatives Blog)


“Investors are sending you a message: ‘We want to own Treasuries, and we’re not afraid.’”

This Bond Market Could Get Uglier – (Bloomberg)


“The amount of money I was making was ludicrous, could take out my folks and even extended family to nice dinners and stuff,” he wrote. “Was planning to get a nice apartment and car or take my parents on a holiday, but now that’s all gone.”

XIV trader: ‘I’ve lost $4 million, 3 years of work and other people’s money’ – (Market Watch)


One of the big problems we face when discussing markets, economics or even politics is that each one of use has different perceptions about the use of probabilistic language. The graphic below summarizes some research on how we perceive certain words.

Why language matters when discussing (volatile) markets – (Abnormal Returns)


Over her four year tenure as Fed chair, the Dow gained a solid 63%. As the chart below shows, this ranks 6th out of the previous 15 Fed chairs:

What Could a New Fed Chair Mean for Markets? – (LPL Financial)


It’s short volatility, a bet against equity turbulence that traders have been piling into for years, lifting assets in related exchange-traded products to more than $3 billion, a record.

VIX at 38 Is Waterloo for the Beloved Short Volatility Trade – (Bloomberg)


It’s important to notice the the damage to XIV is done regardless of if Credit Suisse decides to terminate the ETN or not (they did decide to terminate it)

$XIV Volpocalypse – A Sea of Disinformation and Misunderstanding – (KDW)

But the fund’s net asset value halved on Monday, halved again on Tuesday and continued to fall. Its total assets on Wednesday evening stood at $141m, over $670m less than the $812m it held at the start of the month, according to Bloomberg data.

Fast-growing mutual fund is victim of market turbulence – (FT)

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