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Big Vol-Seller Slammed By Carry Unwind
A few days ago Bloomberg made a big splash with a story about an unknown trader who was so enamored in the BTFD mentality, or for whatever other reason, that he sold a substantial $18 million in VIX calls, betting that the market downdraft would promptly normalize. Alas, while he may have pocketed the cash up front, since then things have not worked out quite as expected for the variation margin requirements of the intrepid seller of vol.
The trade included the sale of 250,000 February 22 calls for about 70 cents each, according to data compiled by Bloomberg and Trade Alert LLC. It happened after the VIX reached an intraday high of 18.99 around 12:20 p.m. New York time. The investor will keep the proceeds if the VIX stays below 22 and the calls expire worthless
We can only suspect the seller believed that the EM FX debacle was a storm in a teacup and that the Turkish rate hike would solve things as he entered the position soon after news broke of the Turkish Central Bank's emergency meeting's timeline.
While the big seller must have been cock-a-hoop for a day, his MTM is starting to hurt now...
and today saw some volume going through but nothing compared to the 250,000 call position he entered...
(click image for large legible version)
As the implied vol of VIX surges.
Of course - only one thing matters...
Charts: Bloomberg
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K-Hen going to get a margin call?
someone is BTFD. stupid dick tease.
It'll be interesting to see how the Fed explains things when they finally make the decision to un-taper with the 10 year yield already back down under 2%. "Ok, Ok, you got us, it was about the stock market all along. But we're still gonna do it."
Do what bitches? Jump the cliff??
I'm sure it will be wordsmithed a bit more eloquently OR presented as a CRISIS so no one dare question the motives.
+1 for the phrase 'cock-a-hoop'
http://www.last.fm/music/Manfred+Mann/_/Cock-A-Hoop/+videos/+6-boFcFZQKtI4
It's all in the game bruh.
Tyler stop posting that EM, USDJPY, S&P chart. You're giving me an erection!
if it last longer then 4 hours, go see a doctor.
You mean a female doctor?
With ample assessts?
If it lasts longer than 4 hours, call more ladies!
"In a span of four days last week, two current executives and one recently retired top ranking executive of major financial firms were found dead. Both media and police have been quick to label the deaths as likely suicides. Missing from the reports is the salient fact that all three of the financial firms the executives worked for are under investigation for potentially serious financial fraud.
The deaths began on Sunday, January 26. London police reported that William Broeksmit, a top executive at Deutsche Bank who had retired in 2013, had been found hanged in his home in the South Kensington section of London. The day after Broeksmit was pronounced dead, Eric Ben-Artzi, a former risk analyst turned whistleblower at Deutsche Bank, was scheduled to speak at Auburn University in Alabama on his allegations that Deutsche had hid $12 billion in losses during the financial crisis with the knowledge of senior executives. Two other whistleblowers have brought similar charges against Deutsche Bank.
Deutsche Bank is also under investigation by global regulators for potentially rigging the foreign exchange markets – an action similar to the charges it settled in 2013 over its traders’ involvement in the rigging of the interest rate benchmark, Libor.
Just two days after Broeksmit’s death, on Tuesday, January 28, a 39-year old American, Gabriel Magee, a Vice President at JPMorgan in London, plunged to his death from the roof of the 33-story European headquarters of JPMorgan in Canary Wharf. According to Magee’s LinkedIn profile, he was involved in “Technical architecture oversight for planning, development, and operation of systems for fixed income securities and interest rate derivatives.”
Magee’s parents, Bill and Nell Magee, are not buying the official story according to press reports and are planning to travel from the United States to London to get at the truth. One of their key issues, which should also trouble the police, is how an employee obtains access to the rooftop of one of the mostly highly secure buildings in London.
Nell Magee was quoted in the London Evening Standard saying her son was “a happy person who was happy with his life.” His friends are equally mystified, stating he was in a happy, long-term relationship with a girlfriend.
JPMorgan is under the same global investigation for potential involvement in rigging foreign exchange rates as is Deutsche Bank. The firm is also said to be under an investigation by the U.S. Senate’s Permanent Subcommittee on Investigations for its involvement in potential misconduct in physical commodities markets in the U.S. and London.
One day after Magee’s death, on Wednesday, January 29, 2014, 50-year old Michael (Mike) Dueker, the Chief Economist at Russell Investments, is said to have died from a 50-foot fall from a highway ramp down an embankment in Washington state. Again, suicide is being presented by media as the likely cause. (Do people holding Ph.D.s really attempt suicide by jumping 50 feet?)
According to Dueker’s official bio, prior to joining Russell Investments, he was an assistant vice president and research economist at the Federal Reserve Bank of St. Louis from 1991 to 2008. His duties there included serving as an associate editor of the Journal of Business and Economic Statistics. He also was editor of Monetary Trends, a monthly publication of the St. Louis Fed.
Bloomberg News quotes William Poole, former President of the St. Louis Fed from 1998 to 2008, saying “Everyone respected his professional skills and good sense.”
When a series of tragic events involving one industry occur within an 18-day timeframe, the statistical probability of these events being random is remote. According to a number of media reports, JPMorgan is conducting an internal investigation of the death of Gabriel Magee. Given that JPMorgan, Deutsche Bank and Russell Investments are subjects themselves of investigations, a more serious, independent look at these deaths is called for."
http://wallstreetonparade.com/2014/02/a-rash-of-deaths-and-a-missing-rep...
"hen a series of tragic events involving one industry occur within an 18-day timeframe, the statistical probability of these events being random is remote. "
There is a suicide every 20 seconds, that's 77,760 suicides globally in 18 days. 3 of them would be ~ 0.00039% of the total in an industry known to be one of the most stressful there is...whoever said its statistically remote is talking shit. The real anomaly is why more of them don't do it.
You are looking at the statistics as part of ALL suicides? You're talking shit. Better to look at the suicides during that time frame, or a larger time frame, for the banking industry. N
That these three men were 1. well off 2. highly educated and 3. most likely knew each other is enough to make this a highly improbable coincidence. Greater still is the fact that at least two were under or part of an investigation.
Is the VIX still as relevant as it used to be? Not sure anymore...
MUST SEE -- "WORLD OF DEBT":
http://www.youtube.com/watch?v=99xsqxzJnXs
LOL- it sure as hell is if you're trading it- ask this dumbass how he feels about his short calls now.....
But if you thought it was something to invest by, you were watching too much CNBC- it's just a trade, dude.
It amazes me how in an environment like today, at some point some serious BTFD takes place. You would think that there would be a day that this game goes straight down--why would people buy a falling knife? But they always do. Only if you knew that your activities affect the market would anyone do such a thing.
Or if you are taking profits on a short position...
Berkshire could do this trade any and every day and make money. Berkshire is the biggest prop trader out there with the Geico cash and the Train,Energy,Oil front running crystal ball they own.
Margin department: "Your maintenance margin is insufficient."
Mr. VIX Seller: "Wait a moment...." [presses a button, congures $10B digital USD instantly, says]..."will wire in $10B after I hang up."
Margin department: "Thanks Stanley, we appreciate your bid-ness."
Double-Down!
I guess the shocking news is that BernankCoin hasn't bailed the fucker out.
What makes you so sure he hasn't?
My bank wouldn't let me sell one call, let alone $18 million worth.
I guess I'm not special (and a relative/neighbor/college buddy)
You're lucky they didn't, U4. Commissions would have been ridiculous, and execution terrible; and even for a limited-risk trade such as a vertical spread or covered write I wouldn't be surprised to hear that a bank would ask you to put up an excessive amount of margin.
If you really want to trade options, check out one of the many brokerages that specialize in options for retail traders/investors, such as ThinkOrSwim, Interactive Brokers, TradeMonster, OptionsHouse, OptionsXpress, etc. You don't need to be a relative/neighbor/college buddy.
The benefit of using a broker who actually knows what options are is that they'll calculate your margin based on the actual risk in your position (assuming a Reg-T account), and they shouldn't charge you more than $1 to $1.50 per contract, with no ticket charge.
I hate to break it to everyone, but the Fed is still pumping what $50 billion plus into all these "markets" on a monthly basis, never mind all the POMO and other games, both known and unknown.
That money can't all go to building out Nigerian cell phone service, Dakota gas land, gold micro-miners and cargo containers of rubber dog shit.
At some point JPM will use all that fake money to buy real gold. And then the music stops.
Some of us already worked that out. 50% PMs + 50 %Cash all outside
the system.
Last orders, gentlemen.
what the fed is pumping is liquidity ...
Cue a Wall Street Journal article on an increase in Q.E. soon!
This guy, I bet, gets his ass handed to him. Even, the BTFD, POMO folks are muttering - "no fucking way - not touching this - nuu uhhh." 200-day magnet, in my opinion, almost ensures it.
Unless he knows something the rest of us don't. Then he makes a fortune. <sarc>But then again, how often is someone on Wall Street privy to information us normies don't have?</sarc>
Would it be impolite to ask...
WHO IS ON THE OTHER SIDE OF THAT WHALE TRADE?
Yes, very - I'd like to know that answer, too.
Market makers, no doubt. They'll hedge it with futures contracts.
Time for the deer pic..... followed by an untaper rumor from Hilsy
Yep, that abandoned car is actually his.
STFP > BTFD?