iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
17,987 Blog Posts

While You Were Getting ‘Terminated’ in $XIV, Goldman Made $200 Million in a Massive Volatility Bet

ALERT: In honor of Le Fly’s magnificent impending birthday, we are handing out 7 day trials to Exodus. Email me a nice note and gain access: flybroker at gmail dot com.

How lovely. Remember a few months ago when Credit Suisse unceremoniously terminated XIV, depleted the accounts of millions in an after-hours session for the ages.

While all of that was happening, muppets getting muppetted, Goldman’s trading desk was raking in a fucking fortune — $200 million to be exact.

Equities sales & trading revenue $2.31 billion, estimate $1.85 billion, up 38% from $1.67 billion

As Zerohedge points out, Goldman warned of an impending XIV collapse in a note three weeks before it happened.

“VIX ETP rebalancing would be most impactful should there be a quick SPX selloff near the end of a trading day, pushing issuers to rebalance positions quickly to avoid unhedged overnight risk (ETN issuers) or excessive tracking error (ETF issuers). With the rebalancing need primarily driven by inverse products instead of levered long products, a multi-day volatility spike (e.g. VIX futures rise 1-3 points for several days in a row) would be less impactful than it would be with more levered long product open interest, since absent inflows the inverse products would shrink quickly on an initial vol spike (and their vega-buying is limited to the total position they are currently short).”

On February 5th, 2018, Goldman’s trading desk, led by Managing Director David Casner, made $200 million on its VIX trade. To put that into perspective, the trading desk typically makes $200m per annum and rarely does more than $100m for a day. Last year it happened just 4 times.

It’s must be good to be King.

Reminder, only ‘complete morons’ lost money in XIV.

Eat the rich. Go ahead and do it.

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13 comments

  1. awanka

    Skulduggery, Mr. Fly. I can’t even hate. It’s quite clever.

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    • it is showtime
      it is showtime

      Ya’ll praise wall st, (and its brainchild, the 3 primary indexes), you allow the thieves and robberbarons to subsist

      It needs to be cut down
      Otherwise
      Enjoy having untouchables

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  2. Lyndon Keltner
    Lyndon Keltner

    So, as of the final week of January 2018, the weekly RSI of the Dow surpassed its previous record set in December 1904. Many algos triggered the buying of put options on the equity indexes since mid-January. That’s why the VIX stopped falling by mid-January.

    Many traders besides Goldman also were long the VIX via VIX futures and their call options. They won too. There was no XIV shenanigan coming from the CBOE.

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  3. ferd

    God’s work.

    He works in mysterious ways.

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  4. natehois

    The way that fund was liquidated after hours is one of the fucked things I’ve seen in my time. I’ll never forget that. But we should have known, it was on page PS-27 of the prospectus!!! Fuck em.

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    • Dr. Fly

      Sorry Nate,

      But you were just a moron for not understanding how it all works. See, that’s how the VIX contracts settle, after hours, only morons, complete morons, did not read the prospectus.

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  5. RaginCajun

    Wrong on so many levels.

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  6. rangersfan

    bili bili ftw

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  7. cancel19

    I for one am one of the many “morons” who knew about the prospectus and took the risk at the most opportune time. However, it would have taken a hydrogen bomb explosion in the center of Manhattan to increase the volatility suddenly without warning to that level. Yet it happened just like the flash crash. An artificial event designed by the powers that be that needed to destroy the status quo of our glorious market for their clandestine reasons. It will happen again!

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  8. moosh

    Goldman ballsachs was fiftty cent?

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  9. ironbird

    Interesting. Appears they play both sides then pick a winner.

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  10. tonka

    So, not only did they read the prospectus, they also warned people about it weeks in advance.

    And people are upset that they made money on the other side?

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