“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.