Investor Makes Mammoth VIX Bet That Could Pay Out $265 Million

Discussion in 'Wall St. News' started by Chuck Krug, Jul 25, 2017.

  1. Quiet1

    Quiet1

    Vix futures multiplier is 1000. Vix options multiplier is 100.
     
    #21     Jul 26, 2017
  2. So I'd need to divide the contract delta by 10, right?
     
    #22     Jul 26, 2017
  3. sle

    sle

    His max delta would be just over 50k short futures contracts if he's delta-one on the high strike calls. Of course, by that time he'd get fired and the whole shenanigan would be unwound at fire-sale prices (pun intended).
     
    #23     Jul 26, 2017
  4. Quiet1

    Quiet1

    He's long 262k calls strike 15. So my estimate of about 25k futs is about right. :p
     
    #24     Jul 26, 2017
  5. Yes, my contract delta numbers were off by a factor of 10...
     
    #25     Jul 26, 2017
  6. sle

    sle

    For his max delta? He's got a 1x2 on, so... you know, the 2x leg...
     
    Last edited: Jul 26, 2017
    #26     Jul 26, 2017
  7. Quiet1

    Quiet1

    Right, making him net short 262k calls, requiring ~25k futs to hedge when VIX much higher.
     
    #27     Jul 26, 2017
  8. sle

    sle

    sorry, my statement was to Marty, not you (posting from a small phone is challenging)

    The best trade to do on the follow is to sell 12p against delta, IMHO
     
    #28     Jul 26, 2017
  9. sle

    sle

    Of course, since it's a risk reversal, what he holds at expiration is less then his maximum delta pivot. A totally realistic scenario is where he's got delta one(ish) against his 15s and VIX quickly rallies above the 25 strike
     
    #29     Jul 26, 2017
  10. maybe he is justing waiting a few days to cap the upside exposure, say by buying the 40 wing
     
    #30     Jul 27, 2017