SEC Charges S&P Dow Jones for Failures Relating to Volatility-Related Index
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A more fair comparison would be like 33% UPRO and 66% TMF. This would get you a portfolio that is similar to SPY, but with some leveraged treasuries on top.
Regardless, bonds have done really well due to the drop in interest rates over the last 10 years and I doubt they can go any lower. Bonds will probably perform a lot worse in the future, unless the fed wants to try out negative rates (unlikely).
Also you don't need them to disclose their returns, you can construct your own version: https://www.portfoliovisualizer.com/backtest-portfolio
Edit: constructing the portfolio, it does seem to outperform SPY on a risk adjusted basis, with a Sharpe of 1.25 from 2010-2021. However, my caveat about bonds still stands.
I say "worse", because this money can only enter the US economy by making the government run a deficit, if it does not do this then unavoidable unemployment is the consequence.
Which leads me to what I think is the real fuck up. Not only the index was also live during after hours, but the fixing used as the basis for the formula for the next day was set at a time after trading hours. I am not 100% sure but I don't think this was the case when the index was initially published.
What that meant was that to replicate the index, the market-makers of the XIV and other short-VIX ETNs had to hedge themselves in after-trading hours market, i.e. in a much less liquid market. And that's when the short-squeeze happened. Now would that short-squeeze have happened during trading hours when there was more liquidity? Possibly, you would need to ask a market participant. But at the minimum it made the problem a lot worse. And I am surprised no one got any heat for that.
XIV collapse was caused by an unprecedented spike in the VIX index.
"Volpocalypse" was indeed an unprecedented spike in IV, which the futures market was reacting to. Seems pretty different to me than the classic short squeeze scenarios of GME or Volkswagen.
The XIV collapse happened on the largest single day percent change in VIX history. It’s a bit silly to say it was the only the futures but not the literal index they track.
Because those of us who have extensive knowledge of volatility products (I was a specialist in VIX options at the CBOE, the first to make markets in VXX, and one of the largest traders in volatility ETF options over the past decade), believe that the spike in the VIX index was caused by arbitrageurs reacting to a spike in the VIX futures. And VIX futures were simply reacting to the order flow caused by the daily rebalancing of leveraged ETFs.
What research have you done to show evidence otherwise?
This collective price response wasn't a short squeeze, but instead it was closer to a gamma squeeze. It didn't rely on finite supply of any security, just limited liquidity and trade sizes large enough to move the market price.
lesson: path dependency is a @##!
Sure, there's after market hours trading for ETFs but liquidity is probably a lot less after 4pm.
Nonetheless, the failure to calculate a live index after 4pm is probably close to irrelevant for the average investor here.
But people who have lost everything in one go? That can only be the result of either grave incompetence/inexperience, or behavioural problems of the kind that don't go so well with trading.
Whatever it was that made them put all their eggs in one basket, these people should not have been making - or even have been able to make - these trades in the first place.
Not only is it encourages to put all you eggs in one basket, it is also society facilitated to do it with a 5, 10, 15 x gearing.
Yes, I talk about real estate.
Of course these people did this to themselves, but perhaps they shouldn't have been able to pile on this much risk, or even have had this type of trade available to them in the first place due to suffering from diagnosed mental health problems, or for having recently displayed behaviour that is indicative of addiction.
The crypto exchanges are also ridiculous. 125x Leverage on Bitcoin, available to anyone who wants it with only a cursory ID check. Most of these apps are also plastered with ads for their own internal gambling products (e.g. "Battle to win, long vs short").
https://www.simplify.us/blog/volatility-premium-harvesting-r...
only 25% instead of 100% like XIV.
Edit: there's so much weirdness in this story. This is the first time I think the SEC has clamped down on a realtime index calculation agent. Also, why would the SEC go after them and not CS ... they're the ones responsible for selling securities to the general public.
https://www.bloomberg.com/opinion/articles/2018-02-09/invers...
How different is a stability index from an index like S&P 500?
I'm prepared to be heavily corrected by financial experts here.
Part of the complaint is that some people relied too much on this feed and got crushed thinking there was some arbitrage opportunity when there wasn't. Any remotely competent financial firm that trades off of the VIX calculates their own value for it.
*) Subject to counterparty risk
As an example for today, look at ALPP... bid: $2.00, ask: $7.00 ... but is is messed up across the board... the real price is around $3.70
And I wish that they would also regulate cryptos because a couple of days ago the spread was $1000 on BTC so I tried to make some money but after I bought with Coinbase, they would not let me sell.
Regarding the CB $1000 spread, it occured due to an exchange outage I believe.
Why would they let you buy and not sell? I bought and tried to sell and it didn't work so I bought again and tried to sell again and it still would not work... Coinbase is very manipulative so they should get regulated.
Ironic given that coinbase is one of the more regulated exchanges out there (the others being gemini and kraken). You can definitely go worse, eg. bitfinex or binance.
IE: The spread was going nuts... 1 second you could buy a bitcoin at $50k and the other you could sell it at $52k.
I have a video of the spread going nuts at a different point in time, but it wasn't this bad.
Even if it is a YC company, they need to regulate them ASAP.
You could buy at 52k and sell at 50k, not the other way around.
Are you using coinbase or coinbase pro? The former gives much worse spreads than the latter, because coinbase is acting as the counterparty. I can't be bothered to check coinbase's spread right now (captcha wall) but on coinbase pro the spread is one cent. https://i.imgur.com/uZHDy4X.png
It's like driving down an icy road that's empty at night and trying to make a right turn. Sure, it might look like you can go fast because it's empty. But it's empty for a reason. And you'll figure that out when you try and take the turn and can't get any traction.
Also, I'm just investing profits at this point so don't worry about me (IE: took out initial capital).
[edit] For clarification, TSLA already had 4 quarters of profit in September 2020 matching sp500 profit requirements but was still left out on a very active decision. [1]
[1] https://www.bloomberg.com/news/articles/2020-09-04/tesla-fal...
https://www.spglobal.com/spdji/en/documents/methodologies/me...
At any rate, even if it were a requirement, Tesla satisfied it at the moment that it was excluded.
[1] https://www.spglobal.com/spdji/en/documents/additional-mater...
It's not my responsibility nor is it even possible to find a reference to a claim that is false. If you claim that X is a requirement, I can't possibly cite a specific page that says "X is not a requirement" because it's not feasible to enumerate all things that are NOT requirements. All I can do is refer you to the list of requirements and ask you to point out which item in that list substantiates your position. That is what I've done by referencing that document which specifies the eligibility criteria and methodology and that's about the most anyone can do since it's generally not possible to prove a negative.
Now you mistakenly believe that page 8 substantiates that claim, but it doesn't. What page 8 states is the following:
>The sum of the most recent four consecutive quarters’ Generally Accepted Accounting Principles (GAAP) earnings (net income excluding discontinued operations) SHOULD be positive as SHOULD the most recent quarter.
The use of the word "should" is as a recommendation, compared to the use of the word "must" which is used for criteria that is mandatory, for example on page 6:
>The issuing company MUST have the following organizational structure and share type...
Now being that it's a suggestion instead of a mandatory requirement, one would reasonably expect there to be an example that goes against that recommendation, and of course there are plenty but for a very recent example take CZR, which was just added to the S&P 500 in March of 2021 despite not having produced a profit since 2019.
https://finance.yahoo.com/quote/CZR?p=CZR
It doesn't fall under any of the exemptions either.