A former manager at Target became a millionaire using one of Wall Street's favorite trades Joe Ciolli Aug. 28, 2017, 4:26 PM You don't have to be a professional investor to make a killing in the volatility market. Just ask Seth M. Golden, who previously worked as a logistics manager at a Target store. The 40-year-old, who lives in a suburb of Ocala, Florida, says he's grown his net worth from $500,000 to $12 million in five years by shorting the CBOE Volatility Index— or VIX — according to a report from Dealbook's Landon Thomas Jr. It's a trade that's worked extremely well this year: The VIX has fallen 19% as investors have looked unperturbed by middling economic data and escalating geopolitical tension. The so-called stock market fear gauge even went as far as to hit a record low on July 21. Golden's investment vehicles of choice are the Barclays iPath S&P 500 Short Term Futures ETN (VXX) and the ProShares Ultra VIX Short Term Futures (UVXY), Thomas found. Both are popular exchange-traded products used to bet on the VIX, and he shorts them. The VXX is the biggest vehicle of its type, attracting more than $14 billion of inflows since 2012, according to data compiled by FactSet and reported by Dealbook. He employs a strategy that's the inverse of the "buy the dip" trade, which involves adding to long positions on weakness. In Golden's case, he waits for the VXX and UVXY to surge, then shorts them further. A large part of his investment thesis is that, because the VXX and UVXY are simply vessels used to track the VIX, they're predisposed to fall over time as they near expiration. Golden also sees a longer-term trend of volatility moving downward into a new, more subdued regime, Thomas found. Yet while Golden has found major success trading VIX-linked instruments, the massive short positions on the fear gauge — regularly identified as one of the market's most dangerously crowded trades — have been a source of consternation for some in the investment community. JPMorgan quant guru Marko Kolanovic, for one, has repeatedly warned of the ever-present possibility of a big, unexpected market move, which could result in a painful unwind. Still, those shorting the VIX continue to double down, Golden included. He plans to start a hedge fund that will short the VIX, according to Thomas' report. And he says investor interest is strong — so strong, in fact, that they're offering him $100 million for starters. "Yes, it is a crowded trade," Mr. Golden acknowledged to Dealbook. "But I don't worry about crowds — I just worry what the next existential shock might be."
He posted an update after the Vol wipeout in February. He said he was still in the game. Haven’t seen any updates since then.
August update...claims to be up 24% ytd as of August, Feb vol spike only put him down 32% "on paper". https://www.marketwatch.com/story/f...-headed-horseman-looms-over-market-2018-07-31 A 2018 survival playbook from the infamous VIX trader who turned $500,000 into $12 million Published: Aug 1, 2018 3:19 a.m. ET 5 Former Target manager sticks to volatility strategy that made him millions as ‘three-headed horseman’ looms over market iStockphoto Are we due for another spike in volatility? By SHAWN LANGLOIS SOCIAL-MEDIA EDITOR It’s been a good year for Seth Golden. Not 2017 good, but still, the former Target TGT, -3.79% manager, whose success story went viral a year ago, claims he’s up about 24% since the beginning of 2018. That’s a far cry from last year, when he nearly doubled his portfolio, and before that, when he reportedly turned $500,000 into $12 million over a stellar five-year stretch. So, yes, 24%... just OK. Meanwhile, the Dow is up about 3% this year, the S&P 500 5.5%. And Golden’s 24% gain looks even better in light of the nosebleed spike in the “fear gauge” VIX, +6.45% back in February that completely blew up traders who’d grown complacent — and rich — by shorting vehicles like the iPath S&P 500 VIX Short-Term Futures ETN VXX, +8.07% . Golden, now the chief market strategist for the Finom Group, was one of those guys. However, he seems to have weathered last winter’s volatility storm better than most, considering that, at the depths of the thrashing, his portfolio was only down about 32%. And that’s just on paper. Bad, but survivable. “I took a hit, though it could have been much worse,” he told MarketWatch. “At that time, I had limited my exposure down to about 12% or 13%, so I looked at it as more of an opportunity and started building positions into the spike.” Here’s how he lays out his general strategy, which, aside from a few gut-checks, has clearly been a winner in this relentless bull market. 1. Allocate 20% of investable capital to short VIX-ETPS, namely UVXY UVXY, +12.35% , TVIX TVIX, +17.25% and VXX. This is an established core position built over time. 2. Maintain a high cash balance which provides roughly 200% liquidity daily 3. Trade around my core position daily/weekly, scalping short-VOL opportunities when presented in order to compound annual returns 4. Maintain core short-VOL positions until they reach a 90%+ profit profile if the market environment remains optimal to do so 5. Participate in a fashion that permits trading my positions during all trading hours available inclusive of pre-market and after hours trading 6. Scale larger core allocation into VIX events of consequence Golden learned from a brutal 60% drawdown in 2015 not to get too carried away with going all in on a single outcome. But the occasional beatdown hasn’t changed his investment style, even in a climate that’s feels ready for a shake-up. “If you believe in the longevity of the market, you have to believe in complacency,” Golden explained. “You have to believe that the optimal way to participate in the volatility trade is to be short.” But there are certainly some “what ifs” to be mindful of in the coming months. Specifically, he’s talking about the impact of the potential tariffs, any indictments and fallout from the Robert Mueller probe, and the Federal Reserve rate hikes that could lead to inversion and fears of a recession. Golden calls them “the three-headed horseman,” and any one of them — or, even worse, all three together — could spark another wrenching volatility event and derail his bullish outlook. “That would portend quite badly for the market,” he said, adding that he still believes in his S&P SPX, -1.91% target of up to 2,950. “Anything can happen, so I leave extra liquidity in place.” He says his volatility exposure is at about 15%, below his norm and down from a high of 70% in September of 2015. The VIX has been on a climb in recent session, hitting highs not seen in weeks. If history is any indication, there could be more of the same in August, when volume is thin and traders are on vacation. In fact, the coming month has been the most volatile over the past two decades, according to Bloomberg. Regardless of whether the worst-case scenario unfolds and sets off a mass market exodus, Golden says he will stick to his “long against the box volatility.” No worries in Tuesday’s session so far, the Dow DJIA, -1.85% is up triple digits while the S&P and Nasdaq COMP, -2.41% are faring even better.
He is doing really well. He tweets almost every day and shows his volatility scalps. The guy is able to short scalp TVIX even on days when it goes up. He seems to be around 80% in cash and advises everyone to keep plenty of cash as well. He also runs some subscription newsletter where he publishes daily commentary. I read some of them a few days later after they become free, and there is some interesting insight. He didn’t seem to believe in bear market, but still managed to predict volatility going up and switching to more cash around October 5th. Here are some of his recent teeets.
That is nice that he is still alive. But the real money isn't in scalping with this huge volatility...
He is holding around 10% of short vol in perpetuity, which may go up to 30% at times. His scalps may be an additional strategy. I am currently backtesting some scalping strategies (and that's why following vol traders), and it's possible to make 300%+ per year (on small investment committed to shorting vol), as they quickly compound. Thus I'm assuming that using 10% cash for shorting volatility, has a potential to generate 30%+ return on total capital. Of course not every year, it's not for everyone, and there are risks and caveats. But volatility trading is alive and well. Couple other vol traders posted $300K+ profit days this year, one trading VIX options. Some may be trading both long and short. And obviously when 99% people lose then it goes to the best. It's not like there are no traders that make serious money.
I wonder how helpful anyone finds his tweets or commentary. I suppose I have become used to quantisising things over the years and his tweets together with the above comments all seem to be vague blurb. Is the nub of it that he has, so far at least, proved successful at predicting short term moves in the market? Clearly his short volatility permanent positions benefit from contango but as to the rest I am very unclear exactly what he claims to be doing. And it isn't a very good sign if he is selling a newsletter.
“Everyone is a genius in a bull market”. The last 9 years have been a Golden Age thanks to the Fed free money train. Relentless bull market. Any small dip immediately bought. VIX products melting month after month with very few hiccups. Hope he can keep it up. I guess we will see
No more updates tell us a lot about whether he's winning or losing, given that he has been providing lots of updates when he was winning in the past.
He makes a ton of money doing what he is doing, so why doesn't he just do what he does, and shoot the breeze on a forum? What is with the fancy website and newsletters and subscriptions? Why do multi-millionaires always feel the need to do this? The whole thing stinks to high-heaven.