Trading & Options · Profile from Trading and Options Research Companion
XIV and Volmageddon
XIV — the VelocityShares Daily Inverse VIX Short-Term ETN — was an unsecured note issued by Credit Suisse AG (Nassau Branch), created in 2010 with VelocityShares (later part of Janus), that paid the daily inverse of an index of first- and second-month VIX futures. It turned the variance risk premium and the VIX futures roll into a stock-like ticker that retail investors could buy in any brokerage account, grew to a market value of ~$1.9bn by February 2018 (investor complaint, Aug 2018 — plaintiffs' figure), and ended on 5 February 2018 — "Volmageddon" — when the VIX closed at 37.32 from 17.31 (+115.6%, the largest one-day rise on record; Shared facts) and XIV's indicative value fell about 96% after the close; holders were finally redeemed at $5.99, a loss of ~94.5% (Settled by C09). Credit Suisse declared an acceleration event on 6 Feb 2018 because the intraday indicative value had fallen to 20% or less of the prior close ($108.3681 on 2 Feb), and redeemed every note on 21 Feb 2018 (Credit Suisse release; Shared facts). ProShares cut its sister product SVXY to −0.5× and UVXY to 1.5× after the close on 27 Feb 2018 (Shared facts). This is a single-event entity, so it has seven moves rather than 7–10 (rule 6). Its story turns on survival removed by product design: an edge that existed, packaged with a daily-reset exposure and a termination clause that made a total loss a matter of when, not if.
At a glance
- Product
- VelocityShares Daily Inverse VIX Short-Term ETNs due 4 Dec 2030, ticker XIV, CUSIP 22542D795 (Credit Suisse release, 6 Feb 2018)
- Issuer
- Credit Suisse AG, acting through its Nassau Branch (from memory, verify branch wording); the notes were Credit Suisse's unsecured debt, not a fund. Credit Suisse was taken over by UBS in 2023 (from memory, verify date); its old media-release URLs now redirect to UBS
- Sponsor / marketer
- VelocityShares LLC created the index-linked products in 2010; Credit Suisse signed a non-exclusive licence in Nov 2010; VelocityShares later became part of Janus (Janus Henderson), which placed and marketed the notes (consolidated complaint, 20 Aug 2018 — plaintiffs' allegations)
- Launch
- 2010; first traded at $10 a note (complaint); inception 29 Nov 2010 (ETF Database; Macroption — secondary); listed on Nasdaq
- Exposure
- −1× the daily return of the S&P 500 VIX Short-Term Futures Index (a rolling mix of the first two VIX futures with ~30 days' average maturity; Short VIX system file), less an investor fee (fee level not checked — verify)
- Scale (dated)
- 14,993,880 notes outstanding on 2 Feb 2018 at a closing indicative value of $108.3681 ≈ $1.62bn (computed from the complaint's note count); the complaint also cites a market capitalisation of ~$1.9bn by Feb 2018 — probably at a higher January price (verify)
- Termination
- Acceleration event declared 6 Feb 2018; accelerated valuation date 15 Feb; last trading day expected 20 Feb; acceleration (payment) date 21 Feb 2018 (Credit Suisse release); redemption at $5.99 a note (complaint)
- Related products
- ProShares SVXY (−1× daily, ETF; −0.5× after 27 Feb 2018) and UVXY (2× long; 1.5× after 27 Feb 2018) (Shared facts); VXX (iPath long VIX ETN, 2009)
- Regulators and venues
- SEC (registered note offerings under Credit Suisse's shelf; 424B pricing supplements on EDGAR — verify filing numbers); Nasdaq (listing and halt); CFTC (VIX futures on Cboe Futures Exchange, CFE)
- Signature moves (incl. failures)
- Launch (2010); the hedging-rights notice after the 2015–16 spikes (Jul 2016); the January 2018 note issuance at the peak; 5 Feb 2018 rebalancing squeeze; the acceleration and termination (6–21 Feb 2018); SVXY/UVXY leverage cuts and the VIX settlement questions (Feb 2018); investor litigation (2018–26)
7 strategic moves analysed
Each one gets a full strategy file in the companion: context, the decision, the financing, what happened, and the lesson.
2010
Launch of the Inverse VIX ETN
New strategy, product or market
2016
Hedging Rights After the 2015 and 2016 Spikes
Leverage, sizing or risk-limit change (issuer side)
2018
Acceleration Event and Termination
Closing a fund or strategy (issuer exercises acceleration right)
2018
February 5 Rebalancing Squeeze
Loss, drawdown or blow-up
2018
Investor Litigation Set Capital v Credit Suisse
Regulatory, enforcement or legal action (private securities class action)
2018
January Note Issuance at the Peak
Capital raise (new note issuance) / capacity decision
2018
SVXY UVXY Leverage Cuts and VIX Settlement Questions
Strategy pivot (issuer leverage cut) / market-structure and legal challenge