A.I.M. Users Bulletin Board

[ls7550]

Good thing you sold

Pure luck (calendar year alignment). Had I not sold, of the order -18% max loss as a total position (treated as a 5x i.e. 20% XIV, 80% bonds).

I suspect much is down to auto-trading. Once that bottoms out perhaps a quick recovery rebound ... when again volatility will remain high. XIV termination??? If permanent would have to look to selling near dated futures, buying longer dated (backwardisation is deep - something like 16% at present) i.e. synthetic/DIY version of XIV. Not as good as XIV however (margin calls etc.).

Only to be expected at times. A synthetic historical calculation I made sometime back had cases of -200% i.e. not possible in practice (limited to -100% loss maximum). However such hard physical limits are a source of the benefit, finite downside, unlimited upside. Providing you treat 5x or whatever leverage respectfully, i.e. no more than 20%, 80% bonds, then that can conceptually yield > S&P500 rewards due to such finite downside, unlimited upside.

Not the time to be buying yet however, as VIX/volatility clusters and a sharp rebound is a high volatility event in itself (further downside pressure on XIV - assuming it survives as a fund).