Originally posted at iBankCoin
How lovely. Remember a few months ago when Credit Suisse unceremoniously terminated XIV, depleted the accounts of millions in an after-hours session for the ages. While all of that was happening, muppets getting muppetted, Goldman's trading desk was raking in a fucking fortune -- $200 million to be exact.
Equities sales & trading revenue $2.31 billion, estimate $1.85 billion, up 38% from $1.67 billion.
As Zerohedge points out, Goldman warned of an impending XIV collapse in a note three weeks before it happened.
"VIX ETP rebalancing would be most impactful should there be a quick SPX selloff near the end of a trading day, pushing issuers to rebalance positions quickly to avoid unhedged overnight risk (ETN issuers) or excessive tracking error (ETF issuers). With the rebalancing need primarily driven by inverse products instead of levered long products, a multi-day volatility spike (e.g. VIX futures rise 1-3 points for several days in a row) would be less impactful than it would be with more levered long product open interest, since absent inflows the inverse products would shrink quickly on an initial vol spike (and their vega-buying is limited to the total position they are currently short)." On February 5th, 2018, Goldman's trading desk, led by Managing Director David Casner, made $200 million on its VIX trade. To put that into perspective, the trading desk typically makes $200m per annum and rarely does more than $100m for a day. Last year it happened just 4 times.
It's must be good to be King. Reminder, only 'complete morons' lost money in XIV.
Only morons who didn't read the prospectus thought $XIV would not trade to zero. Here is the CEO of @CreditSuisse explaining how it all worked. He read the prospectus and knew it would trade to zero. Did you @RampCapitalLLC ? Did you @howardlindzon ? pic.twitter.com/krteWmvjep— The_Real_Fly (@The_Real_Fly) March 15, 2018
Eat the rich. Go ahead and do it.