Guest Post: How To Manipulate VIX Settlement Price

Tyler Durden's picture

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
swissaustrian's picture

Great stuff.

Btfd!

Motley Fool's picture

We shall set up a committee to investigate this matter for the next few years and definitely make a ruling to put an end to this ...soon.

Aeonios's picture

Scratch that, first we need to talk about planning to set up an investigation committee, and then we can agree on a plan to address this issue over the next few years. We expect that everyone will show the necessary political will and uphold the spirit of bipartisan cooperation in dealing with such challenging issues in the future.

Motley Fool's picture

I must nominate you to assist on this planning comittee as your expertise in these matters is made clear by your elequent illustration of the true underlying problems and the path we must forge towards a collective solution.

Fazzie's picture

Can we sill surf for tranny porn?

LongSoupLine's picture

Well, I propose prior to any of this, we appoint a "planning investivative committee Tzar".  The Tzar will require a staff of 50-100 Harvard quant graduates broken into 3-4 sub-teams, each lead by a former Goldman prop desk expert.  The goal is to provide clear and concise reporting (in triplicate of course) as to the impact of such operations and strategies on the overall reelectability of the POTUS.  (Secondary data quantifing impacts to taxpayers and unfair advantages/balances in capital markets may be submitted if time allows.)

DeadFred's picture

Forget the committees, I HAVE VIX options so I want the rest of you to buy some and on the last day pitch in $25 for the common good. If 1% of ZHers did this...

FOC 1183's picture

This is great work and quite plausible.

Racer's picture

So Turnaround Tuesday...

mynhair's picture

Vega?  WTF?  I'm going to drink more.   Delta was a bitch, now Vega? 

You people make this shit up just to impress yourselves?

Nice way to collapse the system; invent shit.

You klowns are like lawyers in that respect.

Central Bankster's picture

Its really not that complicated.

disabledvet's picture

It is scary to think that it could be true. Of course "how is one to know whether an irrational pessimism has taken hold?" Well...here's one way: when the "bullshitski indicator" is "all red all the time." HONESTY...through...DISCLOSURE...never hurts. Unless of course "we actually love Goldman Sachs here too and trade against our clients all the time here, too." Unless of course we're not considered...clients. Now let's get back to our regular "programming" of "wtf is going on in Europe" shall we?

LongSoupLine's picture

I dunno...anything with Greek terms seems like a bad idea these days.

swissaustrian's picture

as you pointed out, the cycles for silver aren´t as clear as they´re for gold. I expect silver to retest 26, at least.

Schmuck Raker's picture

Can somebody loan me $100?

Hephasteus's picture

Learn how to be self sufficent like a banker. Print your own 100 bucks.

oh_bama's picture

I am not a VIX trader but I would like any expert to help me out:

What prevent me from doing this:

0: Buy some 5 cents puts a few days before the expiration tuesday/wednesday, 10000x or whatever amount.

1: Selling the ATM VIX call spread 10000x (The reverse trade of the step 1 above)

2: Puting 2 cents offers (Quote) on all puts below the 5 cents put strikes so they will never trade 5c.

I make money either from the ATM VIX call spread, or, if someone buys a lot of 5 cents options, gain something from the put skew.

Please help

 

 

fzerohedge's picture

Couple of issues.
1- transaction costs.. Think about what the bid ask is to trading baby puts.. The vix futures and variance swaps trade not because they are every
hedged every time with a strip of spx options, but because they are a useful volatility hedge. You are paying to enter a trade not only on multiple spx options but also on a vix call spread.
2- steps 0 and 1 are not the opposite by any means. Step 0 involvles being long vega, but depending on how far down in strike you are invokes some net delta and gamma which needs to be hedged as well. Step 1 is a more pure vol bet.

Trade could easily lose. You set up the trade and spot rallies 3% overnight. Vol falls, your call spread loses money and no one bids for your puts.

oh_bama's picture

Thanks for your insightful and very helpful explaination. tell me how my call spread lose money if vol falls? I sold call spread.

:)

 

Schmuck Raker's picture

Oops. Never mind.

I couldn't understand a word beyond that first paragraph. :)

mynhair's picture

You need to get in touch with your inner Vega.....

bet this klown is in NYC, and is a Vegan...

SilverIsKing's picture

Trade idea:

Short EURCHF

Reasoning:

1. Limited downside given SNB peg of 1.20-1.25 EUR with current price at 1.235.

2. SNB will be forced to de-peg, timing unknown.

3. Potential upside of 20% of more.

Risks:

1. SNB keeps peg indefinitely

2. SNB raises peg

Thoughts?

swissaustrian's picture

THey didn´t burn as much money as many thought to keep the peg, so they have a lot of firepower left.

I actually went long at 1:1 and dumped my calls at 1.21 on the day they announced the peg.

I see were you´re coming from, but if I were you, I´d wait a little bit longer. Your puts will just loose time value if you buy them too early...

SilverIsKing's picture

I wouldn't do this with options unless it got to an extreme due to a particular event and then perhaps I'd play for a snap back.

I am considering taking a forex position, short EURCHF, and just holding until the inevitable happens.

New_Meat's picture

Maximum Pain-Bitchez!

slewie the pi-rat's picture

"...propose a simple modification that makes VIX manipulation too expensive to be profitable."

now, that sounds dangerous!

Hephasteus's picture

You're never going to graduate from Con Artist University with that attitude mister.

jdrose1985's picture

It was just MHFT covering his VIX puts

bob_dabolina's picture

Pop quiz, hotshot. There's a bomb on a bus. Once the bus goes 50 miles an hour, the bomb is armed. If it drops below 50, it blows up. What do you do? What do you do? 

Cat On A Ledge's picture

Simply extend the scope to average closings for the last trading week. Vix is cash-settled after expiration isn't it? That'll work.

karmete's picture

Great!!! thanks for sharing this information to us! sesli chat sesli sohbet