Overnight Credit Suisse decided not to terminate the XIV - instead halt trading of the product for “news pending”. Their news needs to be spectacular- like the ECB gave them a $5-$10B line of credit overnight to defend the XIV product, else people will continue to short the underlying futures product and the bank will be on the hook for billions that they can’t get from XIV shareholders. (XIV would have a negative NAV, but since this is an ETN the shareholders are not on the hook for anything under $0). $CS apparently has 5M shares of XIV per their last filing, and instead of just liquidating and taking their $500M loss they are playing a game of chicken hoping VIX falls back tomorrow to ~20 or so. If instead VIX closes tomorrow at ~80 then $CS will have lost several billion dollars and there will be a run on the bank.
I would like some analysis of my thoughts by people who have actually read the XIV prospectus and can intelligently comment on my line of thought. I could certainly be wrong.
To the average $XIV holder who thought that they would be sold out tomorrow at $4.22 - what are you going to do? If it opens around noon tomorrow with some BS news at say 60 will you buy or sell?
Submitted February 06, 2018 at 05:59AM by nevilleaga http://ift.tt/2GRlY2O
