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

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

  1. ironchef

    ironchef

    Can you kindly explain what you just posted to a lay person?

    A related question for all of you: If he/she hedge his/her trade, would he/she still be able to make $265M at expiration, if not what would his/her profitability be like?

    Thanks.
     
    #31     Jul 27, 2017
  2. JackRab

    JackRab

    Isn't it easier to look at this as a short 12-25 strangle combined with a long 15-25 call spread... even money, or even a bit of credit?

    So I think he's expecting on expiry it's between 15-25, but didn't want to make any initial payment, so sold the strangle. He'll be sitting tight and hedging above 30?

    Or if it's starting to move above 20, maybe he'll buy futures to cover for losing delta's due to gamma, and that way, @ironchef, he might make more than that 265m...

    Surely there will be some more volatility after summer... so the short 12 put wouldn't be much of an issue....

    This all changes a bit when he is already holding a short postition in Oct Vix futures. Which makes more sense to me. He'll make more when the Vix stays around this level, or even goes up slighty... and he's still fine when it shoots to say 20+...

    As always, we don't know the starting point and therefore are slightly in the dark as to his strategy.
     
    Last edited: Jul 27, 2017
    #32     Jul 27, 2017
  3. dealmaker

    dealmaker

    Last edited: Jul 27, 2017
    #33     Jul 27, 2017
  4. JackRab

    JackRab

    "We lost money the first day we put on the trade, but now we are doing great. This is like free money,"...

    They bought puts 'a few days ago'... (Dec expiry?)... but ES is up, and VIX futures haven't moved... so he's bought OTM puts and skew has gone up...?
     
    #34     Jul 27, 2017
  5. ironchef

    ironchef

    #35     Jul 27, 2017
  6. #36     Jul 28, 2017
  7. Anyone know how much he is up on it?
     
    #37     Aug 11, 2017
  8. As of last nite's close (VIX official settlement of 11.70), these were the option closes:
    12 puts - 0.65
    15 calls - 1.64
    25 calls - 0.56

    If my arithmetic is correct, that translates to a mtm PNL of arnd $1.8MM.
     
    #38     Aug 30, 2017
    Chuck Krug likes this.
  9. Arnie

    Arnie

    #39     Aug 31, 2017
  10. Update on the Mammoth

    As of last nite's close (VIX settlement of 10.73):
    12 puts - 0.51
    15 calls - 1.20
    25 calls - 0.30

    So the whole structure is worth 0.09, which means arnd 0.22 further positive mtm PNL since last update.
     
    #40     Sep 12, 2017