Credit Suisse inverse vix ETN XIV was worth over 1.5billion on Monday, next day nearly worthless. CS owned about 32% of outstanding shares of XIV….

XIV is an ETN offered by Credit Suisse to bet against volatility. The way XIV works is complicated, but it is very sensitive to front month VIX being much higher than the next month out. At market close XIV was $99/share. In 15min after market close “someone” drove the front month vix up in a record setting fashion. After 15 min Credit Suisse performs the NAV calc which sets the intrinsic value of XIV based on vix futures…and in that moment it went from about $100 to $4.22. Credit Suisse has a clause in the prospectus for this vehicle that states that they can discontinue the instrument if a tradgedy like this occurred. During inception of XIV, back testing showed that not even a 9/11 event should make what happened Monday happen. The conspiracy os that Credit Suisse may have been the responsible party in making VIX rocket in after hours trade, effectively hedging their own massive position, and crashing their own instrument so that they coild pay out pennies on the remaining outstanding shares.
They admit they were “completely hedged”.
Thats really the billion dollar question here. How and when exactly were they completely hedged?
Anyone holding XIV Tuesday morning lost like 96% of their investment. Credit Suisse claims to have been fully hedged, meaning it was a wash. CS announced Tuesday morning an event acceleration of the ETN, meaning next week it will no longer exist, and they will pay out the calculated NAV value just before that…which will be pretty much 96% or less of the closing value Monday. CS could have simotaneously caused this historic event and profited off of the situation, but nobody really knows unless it gets investigated. They can and very probably will offer the exact same ETN again in the very near future eith the same management fees and profit rolling in….but with their exposure adjusted.
Special Update: XIV Halted, Will Liquidate
“… final closing/liquidation value will be determined. It could be as low as around $4.22 or as high as $21.80.” after closing the prior day at $99.
So much for 10x profits.
From a different source.…
h/t Vox

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