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]

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7 comments:

  1. Eric HolthausOctober 22, 2008 at 12:46 PM

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

    ReplyDelete
  2. AnonymousOctober 22, 2008 at 1:02 PM

    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.

    ReplyDelete
  3. AnonymousOctober 22, 2008 at 2:16 PM

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


    Mac

    ReplyDelete
  4. Bill LubyOctober 22, 2008 at 4:56 PM

    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?

    ReplyDelete
  5. AnonymousOctober 23, 2008 at 8:29 AM

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

    Eric

    ReplyDelete
  6. Bill LubyOctober 23, 2008 at 9:22 AM

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

    ReplyDelete
  7. Bill LubyOctober 26, 2008 at 9:27 AM

    UPDATE:

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

    ReplyDelete