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