Could XIV have been shorted on Feb 5?

Discussion in 'ETFs' started by ajensen, Feb 20, 2018.

  1. ajensen


    I am trying to understand how the uptick rule works.

    XIV closed at 129.35 on Feb-1-2018 and 115.55 on Feb-2-2018, a 10.7% drop. The SEC says this:

    "The alternative uptick rule (Rule 201) approved today imposes restrictions on short selling only when a stock has triggered a circuit breaker by experiencing a price decline of at least 10 percent in one day. At that point, short selling would be permitted if the price of the security is above the current national best bid."

    The XIV opened at 109.57 on Feb-5-2018, and its high was 118.00. Therefore I would have been able to place a limit order to sell short at say 110.00 shortly after the open, if XIV was trading below 110.00, correct? During the day the order should have been filled, since the high was 118.00.
  2. Of course. There was a story about how some small Colorado hedge fund made 86x their money on a bet with buying SVXY puts. (6300 put contracts @ $.34... turned into $28)

    The "long volatility" bet was tried over and over again with futility...until it hit BIG! (Not a game for every trader.)
    jys78 and cdcaveman like this.
  3. Wasn't there a story about the trader nicknamed as "50 Cents"... who kept buying vol calls @ $.50.... losing time after time, until he hit it big for a $400MM profit.... of course he was down $200MM before that, but still... a $200MM net profit is a good thing for those who get it.

    Of course... the "Big Question"... is "Do you run out of money on the play going against you before you catch the big one"?? (Anyone could do this... if their bankroll is big enough.)
  4. Again, Fiddy didn't make it big... His VIX calls were a hedge.
  5. Hmm... That's a cheap black swan bet. Fuck.
  6. Wasn't a "get rich" quick play. Follow up on the story indicated the fund has $350MM in assets but bought only $200k worth of puts... made $17MM, which is ~5% gain to the fund. Nice catch, but not a game changer.
  7. Like I said, a cheap bet. If you're wrong, you're only out $200K. If you're right... Anti-fragile.