The Day VIX Doubled. On February 5th, the VIX index spiked from 17 to 37 in a matter of hours. This move was statistically impossible under standard risk models.
The Feedback Loop: Exchange Traded Products (ETPs) like XIV (Inverse VIX) were forced to buy VIX futures as volatility rose to rebalance their leverage. This buying pressure pushed VIX higher, forcing more buying. A perfect algorithmic death spiral.
The Lesson: Strategies that rely on 'picking up pennies in front of a steamroller' work perfectly, until they don't. Billions in retail wealth were wiped out in an instrument few understood.