Wednesday, October 22, 2008

SPX Options Carpet Bomb Pushes VIX SOQ to 63.04 (!)

Kudos to Adam at Daily Options Report for getting all over the VIX expiration story a little earlier. In Time for an In-VIX-Tigation? Adam wonders about the large number of SPX options trades at the open today.

In the table below, I have reconstructed the details of this attack, which appeared to involve the purchase of close to 300,000 puts (all of which were opening transactions for that strike) and a grand investment of about $150 million.

This transaction pushed the VIX from a close of 53.11 on yesterday to a special opening quotation (for the settlement of VIX options) of 63.04, a 9.93 (18.7%) jump over yesterday's close. If I am able to unearth any additional details about this transaction, I will pass them along.



[source: VIX and More]

7 comments:

Eric said...

another record high VIX close today? I think trying to confirm the market bottom is going to be a long process.

Anonymous said...

The Cash Vix index traded at a new post-1987 high of 81.45 today, higher than the previous October 16, 2008 high of 81.17. The timing of the $150 million purchase of 300000 puts this morning is interesting.

Anonymous said...

It would seem that some hedge fund has learned how to play the game,
and whether they can get away with it again...


Mac

Bill Luby said...

FWIW, the CBOE has corrected the early data and now shows a high of 72.56 from 3:36 ET.

Regarding the gaming of the system, it will be interesting to see what sort of fallout there is from this incident. Perhaps a new settlement process? VWAP? No change?

Anonymous said...

I thought this was an interesting video.
http://www.1440wallstreet.com/index.php/site/comments/trix_in_the_vix/

Eric

Bill Luby said...

Thanks for the heads up on the video, Eric, for some reason I missed it yesterday.

Bill Luby said...

UPDATE:

Based on my analysis, it looks as if these SPX put positions returned approximately $140 million or 96% from Wednesday through Friday.

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