Exchange-traded note (ETN)
Definition · Level 4 · Naked options
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A debt security issued by a bank that promises the return of an index. Unlike a fund it owns nothing for you, so you also carry the bank’s credit risk.
Example
XIV was an ETN: a promise by Credit Suisse, not a basket of assets.
Where Tradecraft teaches it
Level 4 · Naked options, in the lesson “When short vol blows up”: Volmageddon in 2018, the OptionSellers.com collapse and the short squeeze: how one event ended accounts.
Related terms
- Blow-upLosing all or most of an account in a single event, usually from oversized short-vol or leveraged positions.
- VolmageddonMonday 5 February 2018, when the VIX, the index of expected stock-market volatility, more than doubled in a day (about 17 to 37) and inverse…
- XIVA Credit Suisse exchange-traded note that delivered the inverse daily return of short-term futures on the VIX volatility index; redeemed early after…
- Borrow cost in option pricesIn a hard-to-borrow stock, short sellers pay the fee through the options: puts trade expensive and calls cheap compared with parity at normal…
- Calendar Spread – CreditBuy the near-term option and sell the longer-term one at the same strike.
- Call Ratio SpreadBuy one call and sell two higher-strike calls.