Tuesday, October 28, 2008

SPX Put Bomb Update

Last Wednesday, in SPX Options Carpet Bomb Pushes VIX SOQ to 63.04 (!) I reported on a series of transactions involving some 285,000+ SPX put contracts that one party apparently purchased at the open. At the time, my angle on these transactions focused on the ability of the purchaser to artificially create a sharp jump in the ‘special opening quotation’ in the VIX that is used to settle VIX futures and options.

As it turns out, whoever bought those puts did not need to make any money on their VIX positions. If they held on to those SPX puts for just three days, their positions gained 96% and if they held them through yesterday’s close they would be up some 124%. That is a gain of over $180 million according to my calculations. Not bad for less than a week of work…

4 comments:

Marc said...

Doesn't this beg the question...

Somebody knew that there would be massive hedge fund selling in the following days or a lucky guess?

Anonymous said...

Yes, I did pretty well on that trade.




Kidding!

Chris said...

Hope you sold at the open today!

Anonymous said...

there's a better answer to this question, and its not that i knew the market was going down or that i was trying to manipulate the VIX print.

DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2023 Bill Luby. All rights reserved.
 
Web Analytics