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Volatility Rattles Stocks, and Investors Who Bet on a Continuing Calm

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Volatility Rattles Stocks, and Investors Who Bet on a Continuing Calm
“People are scared out of their minds — they are in really rough shape,” said Seth Golden, who left his job as a
manager at a Target store to take up shorting VIX as a full-time business from his living room in Ocala, Fla.
Profiled in last summer, Mr. Golden exemplifies, perhaps in a cautionary way, how easy
it has become to gamble on whether volatility in the stock market will be high or low.
In just two days, investors in XIV and a similar fund, ProShares Short VIX Short Term Futures (SVXY),
saw their assets shrink dramatically, from a combined total of $3 billion to about $150 million.
Hedge fund titans in their Manhattan offices and day traders in their living rooms have poured billions of dollars into opaque, debt-fueled funds known as exchange-traded notes, racier versions of the exchange-traded funds
that track every variety of index or investment and can be bought and sold just like a stock.
Mr. Golden’s preferred vehicles are the iPath S&P 500 VIX Short Term Futures
and ProShares Ultra VIX Short-Term Futures, which he has been betting against for years in trades that have been lucrative — until now.
Now stocks are swinging wildly and volatility is soaring —
and investors who piled into these funds, confident that the calm would continue, are getting rattled.
VIX, which measures investor expectations that stocks will rise or fall sharply in the future, has been at extreme
lows in recent years, making XIV very attractive to investors and pushing it to $1.8 billion in size.

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