The carrying cost of buying VIX makes it hard for average investors.
Trader '50 Cent' lost $197 million betting on market meltdown
- Thread starter ajacobson
- Start date
Actually, 1.5% per year is a fairly reasonable cost for a piece of mind. He's running 15 yards and is mostly probably roughly long the broad market so there is plenty left for him and his clients.
Yeah, he's been in the markets longer that I have been alive and is managing a pretty successful fund. Of course, he has no clue and some dude on ET is going to teach him. lol
Based on the performance of the listed vehicle, Ruffer seems to have underperformed FTSE All Share index by arnd 9.2% this year (also underperformed last year, but only by arnd 3.6%). So them puts have a cost, undoubtedly (assuming Ruffer is Fiddy, in fact). Still, given the nature of the fund and its mandate, it makes perfect sense.
I would have to agree with you there...I like far more 80's and 90's British bands than American one's.
The British also excel in acting; American actors are rather just...blah.
They also excel in looks/beauty...Americans are kind of average. British women have better facial proportions and noses.
British teeth, and cars, and plumbing is rather archaic though. and their Royalty/working class government system.
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I bet it's just a hedge and not a directional bet. There is a chance that it is a Taleb tail risk strategy trader looking for a lottery ticket win with asymmetrical payout, eventually. But those odds seem slimmer than just a hedge by a huge hedge fund with massive AUM.
But more important to note here is why the trader allegedly chooses the '50 cent' contracts, hence the name. This is probably more telling. If you're betting big, why not go further out and increase size with lower price? Or come closer to the money and bet fewer size for higher price using the same amount of money? Why the 50 cent contracts and what does it tell you?
For one, it tells you maybe they are looking for a certain standard deviation move, which will have the consistent 50 cent pricing give or take.
But also, maybe that money spent on the bet comes from some other fixed return that they consume on the hedge in their portfolio. Maybe they hold cash that earns interest, or interests from bnds, or they hold stocks that have dividend. And they use a certain portion of those fixed interest earnings periodically to buy protection against a certain catastrophic SD move.
But more important to note here is why the trader allegedly chooses the '50 cent' contracts, hence the name. This is probably more telling. If you're betting big, why not go further out and increase size with lower price? Or come closer to the money and bet fewer size for higher price using the same amount of money? Why the 50 cent contracts and what does it tell you?
For one, it tells you maybe they are looking for a certain standard deviation move, which will have the consistent 50 cent pricing give or take.
But also, maybe that money spent on the bet comes from some other fixed return that they consume on the hedge in their portfolio. Maybe they hold cash that earns interest, or interests from bnds, or they hold stocks that have dividend. And they use a certain portion of those fixed interest earnings periodically to buy protection against a certain catastrophic SD move.
Indeed. Actually, it seems like their mandate is to be market-neutral (which, on average means "don't be down when SPX is down").
50 cent is finally in the black. $200M profit after $400M swing.
https://www.zerohedge.com/news/2018-02-12/vix-trader-50cent-steamrolls-xiv-traders-200-million-gain
https://www.zerohedge.com/news/2018-02-12/vix-trader-50cent-steamrolls-xiv-traders-200-million-gain
It's a hedge for a $20bln fund(Ruffer). 200m is only 1% I doubt it would've covered the draw down on the recent pullback. Being in the black for your hedge normally means your overall portfolio in the red.