XIV certainly cannot survive. This is exactly why I don't trade this product. It will get wiped out, not in matter of days, but in matter of hours. There are a lot of strategies designed to trade short volatility products, and there are rules of how to adjust when the VIX curve is in contango or backwardation. But in fact, it all happens way too fast before you can do any adjustment. And the probability of this tail event happening is not as remote as historic stats might show.
Just shared about this in my trading journal here on ET: "Day 18: Monday 2/6/2018 This was the big -4% selloff day in the S&P500 and a humbling experience for me. When the VIX starting going nuts at around noon, I figured it would settle down since stocks were holding up pretty well. Afterall, every VIX spike for months had been sold, why would this be any different. Boy was I wrong. I decide to "express" this trade by going long the SVXY-short VIX etf, and added to the position as it went against me. At one point I was long 1,000 shares with a cost basis of $95 (see screenshots of trades below). As some of you may know, SVXY opened at $11.40 this morning after blowing up. Thank God I had enough personal integrity to close the positions at around 2PM EST, and swallow the big loss. If I did not do that, I would have lost $80,000 and could say goodbye to my trading hopes and would have had to gone back to the corporate cubicle. Although I escaped trouble here thanks to getting flat during the day, I am not going to lie, this loss has me somewhat shaken - the most ironic part about this, is that this was the first time I have ever bought a short-volatility product in my life. It will also be the last time I ever buy a volatility product."
What did you end up down? That chart you posted doesn't appear that you got whacked too hard, maybe I'm reading it wrong.
I don't trade those product, and certainly not overnight, but this was a very unusual case and I'm sure you had plenty of company getting run over. I know quite a few saw the carnage in the after hours and thought it was a misspricing. Piled in Someone is always on the wrong side of the trade.
Sorry, this is inaccurate. We were in backwardation on Friday and many on Twitter, including myself, were speaking of the risks of continuing to hold short vol positions. The positioning of the term structure clearly showed which way things wanted to go. Anyone who has holding past Backwardation of less than -10% had not done any prior backtesting. They were just holding and hoping that things would be different this time like they have been recently.
I probably should have given some backstory - I'm keeping a trading journal here on ET because I have a habit over pulling stops and holding losing positions overnight. However, lately I have been getting better at being more disciplined and taking losses during the trading day. My point of posting was to say that if I were not being disciplined and was behaving with my old self-destructive habits, there is a good chance I would have been holding 1,000 SVXY after the market close, with a cost basis of $95....which would have been a disaster as they gapped down to $13.