Trade Alert - (XIV) February 18, 2016

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.

Trade Alert - (XIV)- STOP LOSS

SELL the Velocity Shares Daily Inverse VIX Short Term ETN (XIV) at $18.25 or best

Closing Trade

2-18-2016

Portfolio weighting: 10%

Number of Shares = 422 shares

In January, I was confident that the Volatility Index (VIX) would drop from $30 to $20. Since then, it has done it twice! This morning, it is trading at a lowly $21.92

So the Velocity Shares Daily Inverse VIX Short Term ETN (XIV) should have risen quite substantially, which is a bet that the (VIX) will fall.

Instead, it plunged, at one point falling as low as $15.40, down a mind numbing 35% from my cost.

There is no more frustrating event for a professional trader than being dead right on a fundamental trend, but then the security you buy fails to perform.

I was able to mitigate these losses with aggressive trading and hedging of (SPY) vertical bull and bear call and put spreads, and lived to fight another day.

I don?t know why this happened. The tracking error has been enormous. Maybe it is because the far month (VIX) is remaining unusually elevated, a very rare event.

Sometimes these customized ETF?s are engineered to always make money for the issuer, at the expense of the investor.

Maybe the (XIV) is simply broken, as has happened with many securities, and many cross asset class relationships this year.

But whatever the reason, its time to dump this piece of garbage overboard and stop out while it is still at a multi week high. As with any errant employee, it is not doing its job and should be FIRED!

Time to give it a pink slip, a cardboard box in which it can pack up its belongings, and send it to the unemployment office.

Someday, a math PhD from MIT will explain to me what really happened with the (XIV).

That day it not today.

For a detailed description of this 1X short volatility ETN please click here for the issuer?s website at http://www.velocitysharesetns.com/xiv

Here is the specific trade you need to execute this position:

SELL 422 shares at?????..??$18.25

Net Loss: $23.69 - $18.25 = -$5.44

(-$5.44 X 422 shares) = -$2,295.68, or -2.30% for the notional $100,000 model trading portfolio.

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