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"Termination Event" Arrives: Traders Panic As XIV Disintegrates -90% After The Close

"Termination Event" Arrives: Traders Panic As XIV Disintegrates -90% After The Close

Today's market turmoil has left more questions than answers.

“What was frightening was the speed at which the market tanked,” said Walter “Bucky” Hellwig, Birmingham, Alabama-based senior vice president at BB&T Wealth Management, who helps oversee about $17 billion.

“The drop in the morning was caused by humans, but the free-fall in the afternoon was caused by the machines. It brought back the same reaction that we had in 2010, which was ‘What the heck is going on here?

Some tried to blame it on a fat-finger or 'machines', but in this case it was not the normal cuprits per se...

“There was not a single self-help; there were no outs; there were no fat fingers that we saw,” Doug Cifu, CEO of high-speed trading firm Virtu, told CNBC.

“There were no busted trades, no repricing. It was just an avalanche of orders around 3 o’clock-ish.”

But while we noted earlier that US equity futures were extending losses after the close, but the real panic action is in the volatility complex.

Putting today's VIX move in context, this is among the biggest ever...


And it appears Morgan Stanley was right to bet on VIX hitting 30...



But the real action is in the super-crowded short-vol space.

XIV - The Short VIX ETF - after its relentless diagonal move higher as one after another Target manager sold vol for a living... just disintegrated after-hours, down a stunning 90% to $10.00.



Which is a problem because as we explained last summer, the threshold for an XIV termination event is a -80% drop. What does this mean? Well, in previewing today's events last July, Fasanara Capital explained precisely what is going on last July: