Market volatility leaves Credit Suisse and investors/ traders facing billion of dollars in losses as market volatility swings emotions and trading algorithm in grave yard territory. The troubling question everyone is now asking each other, "how much exposure do you have to SVXY and XIV"? As one entertains that question, the reality could be shocking when trade resumes tomorrow morning, as Warren Buffet would say "Only when the tide goes out do you discover who's been swimming naked". The irony of the above quote probably adds another level of searching as WallStreet sophisticated financial instruments brings further pain, a story many are familiar with.

I am writing this as a speculative piece, currently I believe meetings are currently taking place and the market markers are scratching their heads as the try to sort through this situation. Now these are the charts focusing on the DOW, VIX, SVXY and XIV with a narrative along the way. Lets get this ball rolling with the VIX, snapshot of its parabolic action today. The VIX is seen as a fear gauge of the market, when it dances up like it did today, I can point to something happening in the horizon.

It surely did not disappoint, at the time I was watching the Caterpillar stock and I notice that it had broken the previous day low and gone down all the way to 151, so I quickly pull up the VIX and when I saw it went through 30 level, I was like something is up. Within minutes I got message alert, saying that the DOW just drop 900 points. But that was not the end, the DOW drop a further 600 points. Here's how the chart look

What makes this chart interesting and probably fuel the later dilemma, it quickly recovered from 23923 and reclaim over 700 points with the VIX cooling off the steem. I believe this is where traders tried to catch the knife on SVXY and XIV and the market marker/ trading algorithm jumped the gun. The astute trader/ investor would have gone in and bought some "insurance policy" with SVXY and XIV to protect from losses. Here is how the charts look

XIV

SVXY

What's worrying about these financial instrument, is their after hour trading, both have plummeted, what should have been the insurance policy and hedge has become a greater disaster trading below liquidation prices. Probably the greatest disaster is the underwriter for XIV being Credit Suisse holding over 5 million of its shares itself. If we should do some basic mathematics and we keep it simple here. Let give XIV open price of 110 per share multiply by 5,000,000 we get 550,000,000. Now at the after hours trading which is give a face value of 20 dollars which is being conservative multiple by 5,000,000 we 100,000,000.00. The difference in those numbers give you the magnitude of this loss. We haven't even quantify the lawsuits and fallout of this mess. We have to keep in mind the Swiss bank reported a miserable 303 million in profit. What we don't know is the exposure of the investors/ traders to this instrument but the sea of red could continue if the big players are heavily exposed.

The meetings tonight would be long and tiring as market markers try figure this one out. Was it the algorithm jumping the gun before the market eventually cave in at the end sending these instrument to the graveyard. One of the things are certain, Credit Suisse share price could be under a lot of pressure if the causalities are great and probably who knows a Bear Stearns in the making?