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
18,474 Blog Posts

Goldman Was the Mysterious ’50 Cent’ Vix Trader, And That’s Just Retarded

Real talk here. Goldman was 100% the 50 cent trader — I’d be both my testicles on it. Here I can prove it.

Who else made $200 million in retarded VIX contracts? I say ‘retarded’, in spite of the desk being praised now for its prowess, because who the fuck buys contracts simply based off price? That’s autistic. Moreover, this trading desk lost $200 million at its trough, then started to trade sideways and down, scrounging for 30 cent option contracts. It got to the point that people laughed at the 50 cent trader over cocktails and figured it was some mentally ill Saudi Prince with nothing better to do than get jerked in the options market.

“At one point, he was down $200 million, most of that permanently lost in expired option premium. At one point, ’50 Cent’ became ’30 Cent,’ scrimping on his usual VIX option purchases, unwilling to pay up for the 50 cent VIX options that were his namesake,” Pravit Chintawongvanich, head of derivatives strategy at Macro Risk Advisors, wrote in a note to clients Monday. “But in early February, when it seemed like Fiddy’s fortunes could go no lower, it came: redemption.”

This wasn’t a case of Goldman being gurus and forcing a liquidation of XIV. This was a desperate trading desk in ruins for nearly a year, thanks to a trade gone out and retarded, rinsed clean from the bull market of 2017.

Full discloser, people said it was Ruffer Capital who placed these bets, but for the sake of congruity, I am ignoring this old news clipping and chalking up the trades to Goldman. It suits my world view in this way.

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10 comments

  1. natehois

    Talk about being married to a position.

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  2. zusch

    Ur best piece of investigative journalism and no one fuckin likes the article on twtr?

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  3. wubba wubba

    You shouldn’t bet something you don’t have. Testicles that is.

    Wubba Wubba Woo Woo

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  4. tonka

    Laugh all you want at the implementation, but doesn’t this just show how good of a hedging mechanism VIX options are?

    No way you’d have that good of payoff buying OTM S&P put options for over a year.

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    • numbersgame

      That’s like saying that a lottory ticket is a good hedge against job loss.

      So let’s say VIX is at 10 and you “know” that it will go higher. Well, the market knows as well, so VIX calls will be very expensive. Also, because they are European style, that means that you can only exercise them at expiration. So let’s say that you have an option with a strike of 40 that expires in July. If the VIX spikes to 50, then you are thinking, “Great, my optionis ITM and worth over $10!” Wrong. It will only be worth that if the VIX is still at 50 in July. So timing is even more critical than for American style options, which means more luck is involved.

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      • tonka

        VIX options are cash settled. There is no exercising, regardless of whether you hold to maturity or not. Why wouldn’t you just sell your $10 ITM call before expiration for more than $10?

        Anyways, I’m just saying he would’ve made less money buying index puts.

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        • numbersgame

          What I was trying to say is that they wouldn’t be worth >$10, even if they were ITM by $10.

          Example: VIX is at ~12.5, yet the May 30 15strike puts are priced at $1.65, even though they are ITM by $2.50.

          Your comment didn’t say **in this case** the VIX options were more profitable, but instead generalized on “how good of a hedging mechanism VIX options,” so my comment was addressing the hedging aspects of VIX options.

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          • tonka

            Doesn’t matter where cash VIX is. Those May 30s are priced on the May 30 future right now

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      • MoonshineDelight
        MoonshineDelight

        Who the hell allowed these European style rules into my beloved American synthetic derivative options market?

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