“After VIX shot up 100 percent, the largest move in its history, to 35.73 on Monday, Mr. Golden acknowledged that he was feeling some pain.” The quote was taken from the New York Times and for which I always, always hate to see the words Mr. Golden. Not quite what you may have expected to read to start off a Seth Golden narrative, but please, please read this one all the way through as it comes straight from “the horse’s mouth”. Mr. Golden, I’m older now but still don’t have any appreciation for being called a Mr., but I get the formality coming from the New York Times when they create a narrative that centers on my trading strategy. Last year the New York Times highlighted me in an article that centered on the short-VOL trade. Why? Well the reporter saw my story as a former Target manager-turned “day trader” as unique, compelling and something that could reach not only the common man, but also a wide audience. I quickly became the “poster boy” for the short volatility trade.
Of course when the New York Times highlights an obscure, under the radar, never heard of before person such as myself, the rest of the media world jumps on the story… for better or for worse, intentions. Many of the bandwagon type articles back then were of the “That marks a top for the short-VOL” variety and others were of the “What kind of idiot would short-VOL as a strategy” variety. Nonetheless, some 8 months later it proved not to be the top for the short-VOL trade and in 2017 I nearly doubled my portfolio in value.
More importantly and to the point of this narrative, written by me and likely for me as some attempt at catharsis, recent articles about the Monday VIX-event and my person are either untrue, half-true or taken out of context for the aforementioned reasons of appealing to a wide audience. Keep in mind while reading this that when the New York Times highlighted me in their article last year, there were many nice people who offered to me congratulations and accolades, but there were many others in the media offering me anything but kudos. And since that time some 8 months ago, some have literally been hoping to see a headline certifying the collapse of my strategy and personal performance. For the sake of clarity, many hoped and desire for my financial failure through my strategy that they didn’t fully understand and because they never cared to ask.
Over the last 2 years I’ve been participating on Twitter, posting my trades in the volatility complex as an opportunity to share my strategy with others, anybody willing to read my tweets. I make a trade I post the execution, however quickly I can do so with the objective to share and do so in real time. It helped me to meet a lot of really cool and decent folks while creating an informal record of my trades in social media. I’ve participated in dozens of YouTube interviews and chronicled my volatility trading strategy and rational on TalkMarkets.com. Any persons who had followed my weekly articles outlining my volatility trading through 2017 would have done extraordinarily well and found themselves with a good deal of understanding as to the nature of the VIX and how to go about trading the volatility complex through the usage of VIX-Exchange Traded Products.
So there’s your background folks and that all brings us to the here and now and the many narratives offering my name since Monday’s VIX-event. Monday was an amazing VIX-event and with the VIX spiking greater than 115% intraday. It even caused the collapse of one of the most popular VIX-ETPs. The last day of trading for VelocityShares Daily Inverse VIX Short-Term exchange-traded note (XIV) will be Feb. 20, according to an announcement from Credit Suisse. The bank is triggering this liquidation because the product during these last three volatile days could not keep up with the scenario it was supposed to track. The XIV security had fallen roughly 85% in after-hours trade Monday, causing a panic in the entire VIX-ETP market. The reason Credit Suisse decided to terminate XIV comes from its prospectus as follows:
“If the price of the underlying futures contracts increases by more than 80 percent in a day, it is extremely likely that the Inverse ETNs will depreciate to an Intraday Indicative Value or Closing Indicative Value equal to or less than 20 percent of the prior day’s Closing Indicative Value and will be subject to acceleration,” read the company prospectus. “If an Acceleration Event occurs at any time with respect to any series of the ETNs, we will have the right, and under certain circumstances as described herein the obligation, to accelerate all of the outstanding ETNs of such series.”
So when the VIX goes up greater than 100% and XIV is terminated that must mean Seth Golden’s strategy and his personal brokerage account must have collapsed, right? I’m sorry to say that simply isn’t the case. While the VIX event, that is still ongoing, was severe and constricting to my portfolio as it expressed drawdowns, it did not breed a collapse for me. Throughout my many publications over the years I outline my preferred participation when shorting volatility. My favorite ETPs are UVXY and VXX, to a lesser degree TVIX post reverse split and when it can achieve beta moves. Nowhere in any of my articles on Seeking Alpha or Talk Markets can one point to where I’ve ever even used the likes of XIV or SVXY for that matter. Simply put, I prefer those ETPs that have intrinsic decay and are not subject to beta slippage or have such a finite IV value threshold for unwinding/termination. Moreover, I also prefer those ETPs that would likely only find themselves, as offered in their prospectus, unwinding/terminating should the VIX Futures holdings within the fund/ETP absorb 100% of a VIX move in a single day on the front month Futures contracts. Having actually experiencing such a 100% intraday move higher in the VIX on Monday and with VXX or UVXY operating as intended, I’m that much more confident in my choice of ETP and long-term strategy. But let’s get back to the opening sentence of this narrative offered by the New York Times, shall we?
Context is important and the “pain” I was feeling on Monday was only partially derived from that day’s VIX event. The majority of the “pain” was sympathetic pain for those experiencing the collapsing of XIV and SVXY, which both fell some 85% in the after hours trading that day. The panic that was expressed in the after hours by many in social media and holding these instruments was painful for me. If it wasn’t painful for you…no comment! Moreover, I was trying to field questions from these traders on Twitter and StockTwits and through email and phone calls. At the same time I was fielding requests for media interviews and comments on the VIX event that same evening. Did I mention I have a 2-year old daughter and a newborn? So yes, trying to spread myself so thinly across the landscape that was Monday’s VIX event was quite painful, knowing I wasn’t going to be able to help all in need or satisfy all requests thrust upon me. Fortunately the least of the pains came from any personal losses, as I believed I was positioned well going through the event and in a manner to take advantage of my VOL trading strategy.
The media is sensationalistic in nature and if the verbiage within an article doesn’t capture clicks and subsequent subscriptions it’s likely not written well. The motivation is great to appeal to a wide audience and with a developing story such as the Seth Golden short-VOL story; much will either be embellished or taken out of context if the media outlet has interviewed me directly. (Me, directly, kind of redundant but this is my media outlet so…)
Per requests, I agreed to only a few interviews. Those for which I agreed to were the New York Times, Bloomberg, Reuters and Quartz UK.
- Volatility Rattles Stocks, and Investors Who Bet on a Continuing Calm
- A day-trading millionaire says he isn’t fazed by his favorite strategy blowing up
- Volatility investors: once bitten but not shy
- Amateur Investors Get Burned by Wall Street’s Hottest Trade
If the article you may have read is not found in this list above, it was mere speculation and likely found for bias, with the hope that Seth Golden was met with his demise in the trading world. The following quote from Bloomberg is exact and the reason I’m further highlighting this quote is because it identifies why my portfolio performed relatively decently during Monday’s VIX event.
Seth Golden, a former logistics manager at a Target store, has become a guru of sorts for VIX bettors through his YouTube channel.
“Unfortunately, people get wrapped up when they see markets react so quickly and they get used to the buy-the-dip mentality,” Golden said in an interview from his home in Florida. “You get caught in a manner that doesn’t help you.”
The mean VIX reading last year was barely over 11 percent. Coming into 2018 I had great belief that such a low mean reading would persist in 2018 and with the potential of rising rates as equity valuations became stretched. As such, I came into 2018 with less exposure to volatility and with respect to my usual 20% average exposure annually. I had written many articles since the New Year outlining that 2018 would not mirror 2017 in the volatility complex and it would prove a more difficult trade to short volatility profitably if one did not adjust to the market cycle. These articles can be found on my new website, finomgroup.com. But in short, coming into the VIX-event, utilizing what I believed to be the optimal exposure to volatility and with the more appropriate instruments my drawdowns were expected and lesser than that for which I experienced during the August 2015 VIX event.
Everything stated in that last paragraph I offered to most every interviewer, but can be found in none of their narratives. It’s not sexy, it doesn’t lend itself to the panic that was Monday and only offers rational, prudent investing strategy and psychology. Let’s face it, my detractors of the Ex-Target manager turned millionaire story don’t desire to know that I have a semblance of intelligence or foresight and as such…the media outlets leave this out of their cover stories. It’s just another reason I helped to create finomgroup.com, so that my readers can get it “straight from the horse’s mouth”.
On to another quote, because well let’s face it one story begets another media coverage story such as that offered by MarketWatch whom has never personally interviewed me.
“People are scared out of their minds — they are in really rough shape,” he told the Times. “It is really stressful. I was up until the wee hours, checking my phone to see where VIX futures were trading.”
So MarketWatch picks up on the latest New York Times story and includes the New York Times quote drawing from it their own personal spin for MarketWatch readers. In truth, I was up until the wee hours of the night due to the inundation of requests, emails, tweets, twits and my nagging urge to help where I can possibly do so. Not everyone liked hearing what I had to say in our engagements Monday night, but it was all offered from some 19-years of market experience. “But I thought you worked at Target?” Heaven forbid I should have had a passion for investing while working at Target. Anybody in a softball or bowling league while working a 9-5? Ohhhhhhh! And so far as checking VIX Futures quotes, that’s not specific to Monday, as I do so religiously. I’ve never been much of a sleeper. And to get back to the point, see what a little context can do?
Further more and with regards to the MarketWatch spin story or there take on the New York Times Story: “His portfolio has apparently taken a sizable hit, dwindling down near $3 million.” This is pure speculation based on my current exposure but not with the knowledge of when and where that exposure was finalized through the VIX event. I’ll be darned if I see $3mm worth of drawdowns having positioned decently going into Monday and through Monday. But if it’s on the Internet…well you’ve all heard that saying!
What’s most disturbing about this whole VIX event and the media stories covering the extraordinary event is the underlying desire to see failure in others and build upon that particular sentiment in the mass media world. It’s not about how I planned and participated prudently and survived the VIX surging 115% in a single day. It’s not at all about that! And wouldn’t that make for the better story if indeed we don’t want to see such situations that fell upon many traders that had invested capital in the likes of SVXY or XIV. Is this what we’ve really come to as a society, chastising success for the hope of failure in the future? When I was a kid I went to the circus to see the clowns and the Lion tamer do his show because it was fascinating to see such wild, ferocious animals being controlled by a singular whip (so I thought). As an adult I’ve come to understand that’s not really why most people go to the circus as they rather be there for that time the tight-rope walker falls from the heights of the canopy and the lion tamer is found in the jaws of some 6,7 or 8 lions and tigers. I’m just not that guy, that’s just not me…for better or for worse.
I suppose if the media ready My story though, it will satisfy them.
I was heavily into XIV using a VRP strategy that never triggered a sell signal recently and worse yet, I bought much more going pretty much all-in on the Monday dip.
I actually got to talk to Seth in a quick short Tweet on Monday, before the crap hit the fan. Basically I was trying to say that I liked his methods better than my own. You can only say so much in a Tweet, but I had explained that since all of my money was in retirement accounts, I could not short UVXY and use the layering techniques like he does, which I felt to be a much superior strategy.
I remember saying that I was just hoping to break even on Monday, as I knew it’d be a choppy day. A funny comment in retrospect, no? But a termination event never crossed my mind, at least not on Monday.
Don’t get me wrong, I had not only read the scary stuff in the prospectus years ago, but spent countless hours on Internet discussion boards talking about all of the various scenarios that could happen, the likelihood of it terminating etc.
It was the general consensus that it would take something the magnitude of the 1987 crash for this to happen.
I feel cheated…Not by them as I felt the same way. But cheated that a mundane 4% drop in the market could wipe out all of my hopes and dreams for the future. I can’t even bring myself to tell my family what has happened.
I felt that I had a firm grasp on the risks, and was willing to take them. I even thought that XIV may indeed terminate at some point. It’s a dangerous world. A dirty bomb, a suitcase nuke, a horrible day on Wall Street where stocks marched right through the levels of circuit breakers, but none of this happened.
I had to go out and get drunk just to “self-medicate.” I feel like doing so again. I’m not suicidal, but I feel like there is no reason for living right now. My family knows something is not right and I feel like I don’t even deserve them after what has happened. Moving forward, and knowing what we know now, I would expect many 4% drops in the future. XIV has been described as “picking up $100 bills in front of a steamroller. But a 4% drop? That is more like being encircled by 1000 steamrollers all coming at you from every direction.
What to do now? Well I am all ears if anyone has any advice. I did take some profits along the way, and bought gold coins with them. I actually hate gold as an investment, I mainly did that to try to protect me from myself. I have a habit of seeing a good thing and wanting to always go all-in, and owning relatively illiquid gold prevented me from acting on impulses.
I never intended to cash them in for the foreseeable future, but now I have to slowly do that and start over from scratch. This time I will operate more like Seth.
If anyone has a similar story I’d like to hear it.
Don’t keep this to yourself. See a counselor/psychologist. Don’t try to shoulder the burden on your own. I was in a similar situation once where I had invested some $ for my parents. My situation just involved riding it out, albeit for a whole year to see it rebound. I have an idea of the heavy burden, and if it were me, I would seek a professional to talk about it.
I wish it had not happened to you, and wish you the best.
Thanks BG, I’ve been to a counselor in the past, I will certainly consider it.
@ajthrasher You can always pick of the phone and give me a call AJ! We can certainly schedule a call. I know this was hard on you obviously, but think of where I came from. A heroine addicted mother who beat me daily if I didn’t hold the belt to help her shoot up. That’ was my childhood until she took off when I was 7, brother 3, sister less than a year. Father got incarcerated and they put us in group homes for children. Had to escape there with my brother because what did the care takers do, beat us also. Slept in the streets, under overpasses for days on end until we found our home. Electric and water were working, went to school the next day. Stole food, yep, stole food to feed ourselves until eventually my father came walking through that door again and brought us all back together absent my mother. I’m still standing, still managing through life with these memories and scars, still a struggle daily because such early exposure to a volatile life….well it just doesn’t really ever go away in your psyche. But I manage and I manage to love, care and help to the extent I’m capable. Life will go on despite the adversity of today and you have to find that spirit to do so!
Thanks guys, I really needed to feel like somebody cares, I felt so alone.
Seth, I really appreciate the offer, I know you’ve been really busy lately from all of this. I won’t call you for now. I had been following your articles long before the “famous” NYT article came out, so I’ve seen you mention your childhood before.
One reason I can’t seem to come to terms with this is because this is the 2nd time in my life that this has happened. Back in the mid 90s, I had put all of my money into a Canadian exploration company called Bre-X minerals. After a slow start, the stock had gone from pennies to $280 a share, ( $5 BILLION MARKET CAP ) and I had gotten in around $8. We thought we had the largest gold find the world had ever seen, ( In Indonesia ) estimates went to 200 million ounces of “proven” and probable reserves. Long story short, there was nothing there. It had fooled even the most seasoned experts in both the mining and finance communities. An outside company, you have probably heard of them, it was Freeport Mcmoran, was assigned ( Forced upon them ) as a partner by the corrupt Indonesian government. Their initial drilling revealed there was nothing there, and the stock dropped to $5 overnight. We all thought “okay, so they are exaggerating some, it happens quite often in mining.” “Surely there must still be a sizable deposit, with 3 geologists on site and experts galore.” But no, an impartial independent outside firm was brought in and not one ounce. So the stock went to zero. It actually caused the entire stock market ( What was called the Vancouver exchange ) to blow up, it ceased to exist shortly after that because Bre-X dragged almost everyone down with it.
I’m not young anymore. Starting over from scratch a third time at my age seems like an insurmountable task.
But again, thanks for listening, and caring. I guess I will try to figure out something!
P.S. – My XIV VRP strategy STILL has not signaled to sell. Actually I did worry about this one aspect of the strategy, if volatility rises fast and linear, it always seems to stay ahead of realized volatility and so in this scenario you never get out, lol. I guess I have to try and laugh to keep from crying.
AJ,
Unfortunately there are a ton of stories like yours out there. its hard to know how many but look at the volume of XIV or SVXY last friday is 5 times normal. I tried to sell because i thought the price would be cheaper. But like you say anybody short vol in a retirement account has to go long an inverse etp.
Now there really isnt a retirement account left so the problem of no shorting is removed. Ironic that such rules are made to protect us from ourselves. Thanks Goverment.
All you can do is go forward. its brutal to lose so much in blink of an eye. A 4% drop S&P i still don’t get. Or why only 2 etp’s got crushed.
Now you need to shape your mind to being a retired investor. Sellin Puts for income is a strategy that works. Size is always what kills you. Manage size is to manage risk. You can go long UVXY every month and not destry your portfolio if you manage size.
Tough lesson. I’m there with ya man.
So much for the retirement accounts Steve. If the IRS allowed margin in retirement accounts I’d probably be sitting pretty right now. They box us in under the guise of protecting us. And yet my accounts went to zero. As far as selling puts, I used to mess with options years ago and am willing to learn more but for some reason they don’t appeal to me. I never got burned with them, but never really got the hang of it either.
I really like Seth Golden and the idea of just directly shorting UVXY and VXX. It is just that the assets I own now will take forever to convert to cash, get into my brokerage account, and get started again. By the time I do even the first cash-conversion of my gold coins, the VIX will probably be back to normal levels.
If there is a lesson to be learned, I am too old to utilize it, or so I feel right now.
But who knows? Maybe in a year or two from now I will be happy again. I will be forced to sort of do a dollar-cost-averaging type of thing, as I can’t just walk into my local coin dealer and ask to convert to cash all at once. Maybe that is a good thing. I don’t know. I guess we will see. I will try.
Aj…I am very sorry for you. I had a similar incident in 2016 by double shorting NUGT and DUsT..where NUgT went up for around 10times… After that i promised myself that i have a baby to take care and never touch those products….its tough life. We think we are all covered from all angles and some unknown thing comes out and kills. I am still learning but faced enough bad experiences with NUGT and WAMU bank etc. . hope & pray you will find very good luck very soon…
NUGT and DUST are both down 99% in 5 years…are great shorts…..
Wow Sunil, I really feel a connection with you here. I actually dabbled with both NUGT and DUST myself, the leverage really appealed to me, and Washington Mutual Bank, I had experience with them too. All ended up bad in the end, but they weren’t the ones that killed me.
I feel like the American spirit is to jump into the unknown, be willing to take chances, just don’t be too stupid about it. I always tried to live up to that, to believe in what I was doing. I always did my research, and felt confident about what I was engaging in. It just never seemed to work out. I don’t know what is wrong with me. The bigger my failures, the more I feel like I have to “swing for the fences” in baseball terms, to make up for it.
I will pray for you and your baby tonight, I want to believe that what goes around comes around. I really do appreciate greatly your well-wishes for me. I will do likewise for you.
The thing I still can’t get over, and probably never will, is when you think you understand the risks. And these risks are very real. We are willing to deal with that. But to quote you, “We think we are all covered from all angles and some unknown thing comes out and kills.”
It seems like this is always the case. I ALWAYS felt that if the bad things we considered came along and wrecked us, then we could live with that. We considered that, even planned for the possibility…But it’s always some new weird thing that comes along. “Live and learn” is an old adage, but the problem is that by the time we learn, we are too old.
AJ, Hahaha….i just felt like i wrote that message:-).. Thank you and its truly very kind of you .
Every other day, i think about your last line, what the heck, how long i should freaking learn a new lesson..would it ever end…
The monday night i felt i am plain stupid 1x thinking almost an year how pair trading on UVXY/SVXY would work in the respective ratios of 1:2 or 1:2.5 etc. Calculated the sheets with so many years etc..etc…finally monday AH i realized, SVXY fallinf 80% wouldnt actually make UVXY profit by 160%.. Holysmokes…
Then Tuesday Morning i am not 1x , i am at the very least 5x times stupid (the most leveraged stupid) because i realized even pair trading of Long UVXY and Short VXX also will not have worked…i felt like i will only learn but never make any wins…
Again…thank you for sharing your experiences..very kind of you..
Thank you Seth/David for having this fantastic platform for not only sharing your wisdom but also connecting people….
Seth: I am very sorry for your childhood. I couldnt visualize those moments…You are true inspirier..!!
AJ,
Thank you for sharing your story. I wish you all the best.
Seth,
These losers who hate you for your success are not worth your time or emotion. They did not take the risks, they did not do the hard work, they did not spend sleepless nights with mucho n the line, and they did not execute…just incredible how small they must be to feel so diminished by another person’s success. I personally get inspired by other people’s success, and I trying to get closer to and learn as much as I can.