Quote:
Originally Posted by InglewoodFan
I'm not familiar at all with XIV, do you have any good starting points to read up on it?
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I don't really understand it myself. But essentially the xiv was a derivative etn of the options exchange that tracked volatility in options trading in reverse to the vix which still functions today. As the vix went down the xiv went up. And that was the norm for a long period of time. Eventually volatility increased and the vix went way up causing the xiv to go down. As an etn the underlying securities of the xiv had to be adjusted every day to reflect its weighted value and when those values went down, the act of purchasing the opposite security to balance the books caused the derivative value to spiral downwards uncontrollably. Like a death sprial. A self fulfilling prophecy. Or like a suicide. A similar thing is happening now with the USO fund. Leveraged investors have to sell to cover positions in futures contracts. That selling drives down the value of their own security. I didn't know USO was derived like that. I thought it was a straight up oil fund.
About the xiv...
https://www.forbes.com/sites/jimcoll.../#1d2446443c38