And that is the outcome of XIV in one day of wipe out! Years of no brainer shorting the VIX trade making money month after month and all it takes is 1 night of volatility to reset. Beware derivative exptic products. I had a discussions a few months ago on such strategy VIX etn which people were claiming is a no brainer short VIX but long these inverse derivative. The hedge is to use options to cover the other side but as you can see in the XIV example, if you lose the principal will the hedge neutralise that catastrophic outcome? Maybe it leaves you with a major crew cut and you do get a small portion of your capital back!
I like to throw the bankers who invented this product and mates who encourage them slowly a limb at a time into a meat grinder. No panadol and the rate is faster than with panadol.
