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Hearing the VIX products carnage crushed some Prop Firms

  1. $21,000,000 loss at one well known Chicago prop firm. Heard they fired a large group of traders yesterday.

    $8,000,000 loss at another prop in Texas.

    Many stories of individual traders losing high 6 /low 7 figures and wiping out their accounts.

    Sorry to hear about the misery.
    Best of luck to everyone.
     
  2. I’ve been told that spike in VX future’s was related to the closing of that etf XIV. That the manager in prep to close sent an order to buy 260,000 VIX future’s at the market.

    Can anyone confirm this?
     
  3. It's probably true... The extent of the "negative convexity" of ETP issuers was pretty well flagged, though, ahead of time.
     
  4. which? not too many now a days
     
  5. Wonder what the next product “financial engineers” will come up with next. Don’t think anyone really understands the possible complexities of today’s markets. Just keep making derivatives of derivatives and then make some derivitaves on that, then basket them all together, yada yada.

    Wish I was trading in the old days when stocks traded in 1/8ths. Sounds like a simple world.
     
  6. But why complain ? Sure some of this stuff is madness, but this madness also gives a good trader so many opportunities. I mean, the volatility of the past 2 days, especially in products like ES and NQ, wasnt this beautiful and traders wet dream ?
     
  7. I've wondered this myself. If so, this would be a case of the derivative driving the price of it's underlying...which of course happens regularly, but here it's singularly bad here because there's no VIX assets to give it fundamental underlying value. Like bitcoin without the pretext of currency you may one day be able to spend.
     
  8. XIV is an ETN.
     
  9. o_O

    ...that trades in VIX futures and (presumably) exited their short positions on Monday.
     
  10. If true, why would they do that in AH trading?
     
  11. Because losses can accumulate ATH, and they had a short product that was about to blowout the whole fund and Credit Suisse would have been left holding the bag for any excess losses.
     
  12. Proshares was about 40% of the Open Interest in the front 2 futures. Given how the OI is now half of what it was a week ago that number seems right. Additionally, the OCC in all of its wisdom tripled margins overnight on the 6th which I can only imagine contributed to a lot of forced blowups.

    We might get another episode into next week's expiration but other than that the liquidations are subsiding.
     
  13. I have no issues with the markets as they are. I think they are so much better, we have great trading platforms, super low commissions and powerful computers. No need to mess with the floor and have to fight traffic, crowds and stand on your feet for hours.

    You can do all of this from your home office.

    I do not feel sorry for people who thought they were geniuses in a prolonged bull market and were trading exotic ETNS based on derivatives without the full understanding of potential risks/events. They chose to trade naked and did not hedge. Now they blew out their capital.


    I am still around and still profitable, during bull and bear markets. I hedge my risk and always focus on risk management first, profits second. Over time the profits add up and your trading capital continues to grow.
     
  14. The sad part is that this was just a handful of traders there, and a bad risk manager, that let this happen. There are a lot of traders that weren’t involved in that trade that will probably lose their capital.

    I was lucky enough to dodge that bullet, but a lot of guys are now in the dark as to whether or not they’ll ever see their capital. I guess that’s the risk you take with a prop firm but the way the firm was touting their risk department lately made it seem like they were on top of things but dealing with “G” (please don’t message me for names or details) you got the feeling he was well over his head.