Curious, did u manage to come out positive from this mess ? Hats off to all those who actually ride the tidal waves and come out of it relatively unscathed
RONIN Capital is no more
- Thread starter nastazio151
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Curious, did u manage to come out positive from this mess ? Hats off to all those who actually ride the tidal waves and come out of it relatively unscathed
If you’re making markets to the extent they did I’m not surprised.
If you’re making markets - you’re going to get run over in one direction, and if it’s a sustained trend chances are it’s the wrong direction. My guess is that the CME raising margins repeatedly on their primary hedge instrument over a short period of time didn’t help matters.
A lot of groups started shorting the VIX when it went to 30, got stopped out at 50...shorted again at 60...and then stopped out or liquidated when it reached 80. Chicago prop groups that like to be short premium (which usually works 99/100 times) are blowing out left and right.
Buying VIX futures to hedge your short gamma position doesn't work in this environment either. Long VIX futures and short gamma when the market rips up 12% in one day will bankrupt your firm.
Whoever bought Ronin's position is probably cleaning up. I'm sure Don "Doogie" Wilson (DRW) was all over that auction liquidation. I heard in 2008 DRW bought Lehman's whole Eurodollar position and ended up making $165M on it. They're always there for the low hanging fruit.
Buying VIX futures to hedge your short gamma position doesn't work in this environment either. Long VIX futures and short gamma when the market rips up 12% in one day will bankrupt your firm.
Whoever bought Ronin's position is probably cleaning up. I'm sure Don "Doogie" Wilson (DRW) was all over that auction liquidation. I heard in 2008 DRW bought Lehman's whole Eurodollar position and ended up making $165M on it. They're always there for the low hanging fruit.
I run short vol strats during bull markets so any sharp selloffs are quite painful by definition. I am a big fan of leverage too so this vix spike was particularly painful. I think i was down something like 30% on the first 10% down on the sp.
Silver lining is that i tend to do quite well in subsequent higher vol regimes so if this vol stays elevate for quarter or two i expect to have a really good year. When it comes to the speed and magnitude of the term structure inversion, this was def one for the record books.
This is precisely why i like to sell vol when its cheap and buy vol when it starts to run. I am surprised the CFE didn't bump up margins a lot more. While their margins were truly rich at 13 vix now at 70-80 they are kind of silly especially mid/back curve.
So are all of Ronin's traders done? Ronin was always set up as groups of individual traders who were basically backed by the firm and didn't share in the profits/losses of the other groups unless a situation like this happened where I assume that all traders had their equity wiped out. That was always the problem with holding money with the Staffords as a trader because they were involved in so many risky ventures that the trader at the firm was implicitly backing their operations without any upside and assuming the potential blow out risk of something beyond their control.
Each trader / trading group has their own contract and risk parameters with Ronin. Same with other Prop futures firms. Now when they pay out to positive account equity traders and trading groups - who can say. I’m sure that there are trader employees asking that question right now.