XIV ETF has almost doubled since it launch about half a year ago. If you invested in the beginning and made a lot of money - congratulations! But the big question is: can we expect the same excellent performance from XIV going into the future? To answer this question I look at the SPVXSP index - the underlying for both VXX and XIV for the last 5 years. I take the values of the index and simulate hypothetical performance for the ETFs (starting values normalized to 100)
While the last half-year for the XIV have been excellent, XIV had a huge drawdown losing over 80% of its value at one point. In the five years since June 2006 to January 2011 XIV was flat, and despite its excellent performance in the past half-year XIV still would not have recovered from the drawdown.There is obviously a lot of risk in XIV that recent history does not account for. Geometric annualized return for the index (like-VXX) is -37.47%. Geometric annualized return for the daily inverse (like-XIV) is 12.77%
EDIT: See my new post on XIV.