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"50 Cent" Made a Killing in VIX...
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Had to endure a lot of pain for a long time but it appears his (yes, I assumed his gender) big payday finally came.


WTB: TriRig Omega SV (not x). PM me if you have one :)
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Re: "50 Cent" Made a Killing in VIX... [GreenPlease] [ In reply to ]
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I can feel Monty cringing......
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Re: "50 Cent" Made a Killing in VIX... [GreenPlease] [ In reply to ]
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Re: "50 Cent" Made a Killing in VIX... [spudone] [ In reply to ]
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No claim to certainty is expressed here.
The backstory as I see it is.....

There are two things:
1) Being “long” volatility.
2) Being “short” volatility.

Being “long” volatility might be beneficial in that volatility often goes up when the market goes down. Being “long” volatility MIGHT thus sometimes be a decent hedge against declining stocks.
The stock market was/is high (in many ways).
And volatility was at an all time low (several weeks ago).

The problem with being “long” volatility is with the complexity of the instruments (depreciating derivatives) and leverage.
Being “long volatility” MIGHT sometimes makes sense.
But it is highly complex and highly problematic.

I believe that this is what 50 cents (or his investment team) is supposed to have done (successfully).

2) The implosion that the article discusses is associated with being “short” volatility.
This has the same problem as being “long” volatility- in that you are investing in depreciating derivatives that use leverage.
But being “short” does NOT have hedge justification that being “long” might have.
In effect you are betting that volatility (already at record lows) is going to get lower quickly.
Being “short” volatility in late January would argue that- 1) Markets would be even less volatile (markets were at a record low volatility), or 2) Markets are likely to go up more than expected.

Basically being “short” volatility is a ridiculously complex investment that. The strategy probably only make sense to a few very specific types of institutional traders.
And would almost never make sense for a retail investor.
But it was supposedly retail investors that were invested in this inverse volatility thing XIV (backwards of VIX- the volatility index).

Which begs the questions...
Why?
Who?

Who- Kramer (and others) says it was arrogant yahoos
Why - these yahoos believed themselves to be genius’ but ironically didn’t understand what they were doing .

The Kramer explanation seems likely to me.

But I didn’t investigate the Kramer thesis.
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Re: "50 Cent" Made a Killing in VIX... [Velocibuddha] [ In reply to ]
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I agree with what you said about the complexity level. In this case I think it is a recipe for failure unless you are either a) very lucky - which won't be the case over the long haul, or b) have some level of insider knowledge or ability to deeply affect the market (say, Carl Icahn).

People are making money through this, but that doesn't mean they are playing fair. The article about the manipulation of options in the 30 day range... let's just say it doesn't surprise me. Someone like 50 cent may have been well aware of the manipulation and intentionally played into a correction. I realize that's just speculation, but for the guys that eat and breathe and sleep this stuff, I don't think it's mere luck.
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Re: "50 Cent" Made a Killing in VIX... [spudone] [ In reply to ]
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Yeah, people like George Soros have teams of people to spot gov't stupidity and particular situations around the globe that they might take advantage of. I would imagine you would need a team of economists, gov't insiders, and lawyers. Seems to me a key would be to spot the situations developing quickly to have the time to take advantage. You can't do that with journalist levels of information like most of us receive.
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