`50 Cent’ Volatility Buyer Is Back With Bet VIX Will Double – Finance News

on Jun14

13 June 2018 | 6:00 pm

(Bloomberg)—“50 Cent” is back. Or at least, a pretty convincing impersonator who spent $5 million on volatility hedges this week.

The mysterious buyer, or buyers, earned the nickname—a play on the rapper Curtis Jackson, known as “50 Cent”—after relentlessly purchasing huge lots of call options tied to the VIX at around 50 cents a pop.

A nearly identical trade was put on over the past two days, likely intended as a hedge, betting that equity-price swings will rip higher with the Cboe Volatility Index sitting below its two-year average.

Yesterday morning, 50,000 call options with a strike price of 28 were purchased at 50 and 51 cents apiece. Then at 9:50 a.m. in New York today, the same trade was made at 49 cents a piece. The options expire in August. The VIX is currently below 13.

The enigmatic figure had disappeared from the spotlight after a big payoff in February, when the VIX surged to 37.3 from 17.3 in just one day. The out-of-money options were estimated to have earned $200 million during the volatility explosion.

“He might see it as a good value hedge given the propensity for the VIX to double overnight if there is another ETN-led short squeeze like we saw in February,” said Cathal Hardiman, an institutional trader at IMC Trading BV, which provides liquidity for European volatility derivatives.

A trade war, a hawkish monetary mistake and a crisis in either the emerging markets or euro area were cited as the biggest tail risks in a Bank of America survey of global equity investors this week. Based on economic fundamentals, the VIX should currently trade at 14.1, according to a Macro Risk Advisors model.

“Either way, him or not, someone somewhere is taking a view for late summer,” said Tim Emmott, executive director at Olivetree Financial in London.

More:
VIX woes open up opportunities for Cboe rivals

Cboe, BlackRock to launch corporate bond futures
As VIX manipulation talk amplifies, Cboe crafts a message



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