The Tell: Here’s the trade that made $400 million on last week’s volatility spike

As a temporary panic gripped stock market investors during last week’s selloff, one trader turned a loss into almost $400 million in profit thanks to a tiny series of bets on a volatility spike.

The trader is known as ‘50 Cent’—not to be confused with the accidental bitcoin millionaire and rapper—and got his name from buying small options for the Cboe Volatility Index, or VIX VIX, -2.50% for as little as half a dollar, hoping that the low volatility environment that had persisted until the beginning of this month would turn, according to reports by the Financial Times and Business Insider.

And did it ever turn.

The VIX, which uses options on the S&P 500 SPX, +0.26% to calculate expected volatility over the coming 30 days, spiked to its highest level since the Brexit referendum in June 2016, recording its largest percentage change in history, last week amid a global equity selloff.

Read: How Wall Street’s ‘fear gauge’ is being rigged, according to one whistleblower

According to Macro Risk Advisors, the VIX trade made profit of close to $400 million for ‘50 Cent’, moving it from a $197 million loss position to a $183 million profit in a matter of weeks.

The profit and loss summary of the ‘50 Cent’ VIX trade

‘50 Cent’ was identified as Ruffer LLP, a London-based asset manager run by Jonathan Ruffer, last year by the FT, citing sources at four banks that were familiar with the trades. Ruffer LLP didn’t immediately respond to an email requesting comment.

While the trade will have most likely not just been pure speculation but part of a hedging strategy for Ruffer’s portfolio, it was also uncertain whether Ruffer had actually monetized its options, Macro Risk Advisors told the FT.

Filed in: Top News Tags: 

You might like:

The Wall Street Journal: Stacey Abrams eyes history after win in Georgia gubernatorial primary The Wall Street Journal: Stacey Abrams eyes history after win in Georgia gubernatorial primary
Asia Markets: Nikkei leads Asian-market losses as investors’ geopolitical worries grow Asia Markets: Nikkei leads Asian-market losses as investors’ geopolitical worries grow
The Wall Street Journal: Walmart to buy SoftBank’s stake in India’s Flipkart The Wall Street Journal: Walmart to buy SoftBank’s stake in India’s Flipkart
The Wall Street Journal: Wynn Resorts’ executive compensation plan rejected by shareholders The Wall Street Journal: Wynn Resorts’ executive compensation plan rejected by shareholders
Trump hints at more tax cuts to be unveiled before November Trump hints at more tax cuts to be unveiled before November
One New York couple asked a court to help them evict their 30-year-old son One New York couple asked a court to help them evict their 30-year-old son
The Wall Street Journal: Israeli firm partnered with Cambridge Analytica to win U.S. government contracts The Wall Street Journal: Israeli firm partnered with Cambridge Analytica to win U.S. government contracts
Key Words: Is voting in 2018 really as important as in 2016? Trump’s not so sure Key Words: Is voting in 2018 really as important as in 2016? Trump’s not so sure

Leave a Reply

Submit Comment
© 2018 Stock Investors News. All rights reserved. XHTML / CSS Valid.