The ‘VIX Elephant’ has awakened. And ’50 Cent’ is back.
That’s the mysterious-sounding ointroduction to a notable market insight from Bloomberg this mornig as they note the turmoil surrounding Mike Flynn headlines – spiking VIX and slamming stocks – provided two big options market ‘whales’ with some relief and room to move…
First, the trader who’s known as the Elephant for making big moves in the VIX — but who’s been surprisingly quiet in recent weeks — returned with a vengeance to start December, buying and selling more than 2 million contracts Friday to continue betting on a modest rise in the Cboe Volatility Index. That’s three times the average daily volume for all VIX options.
The Elephant caught a major break thanks to the sharp retreat in the S&P 500 Index following reports that former national security adviser Michael Flynn would implicate members of President Donald Trump’s transition team in the probe into Russian meddling in the 2016 election. The VIX spiked to as high as 14.58 as equities tumbled.
Pravit Chintawongvanich, head of derivatives strategy at Macro Risk Advisors, said the investor had been poised to lose $20 million to $30 million on the December leg of this trade before Friday, but was able to escape with a loss of less than $2 million in closing up those positions.
‘They got really lucky with the selloff today,’ Chintawongvanich said.
‘They were down a lot on the December position, and this allows them to get out of it without too much of a loss.’
This post was published at Zero Hedge on Dec 1, 2017.