from Hacker News

A mystery trader just made over $200M betting on Volatility

by teapot01 on 2/6/18, 1:37 AM with 5 comments

• by tfehring on 2/6/18, 3:25 AM

  Assuming the trader is still holding the position described in the article, they have made significantly less profit to date, and they may have even lost money. That's because for each long 15-strike VIX call they hold, they're short two 25-strike VIX calls.

  Their payoff diagram from this position w.r.t. the VIX settlement value at the time that their options expire increases linearly from 15 to 25, then decreases linearly (with a slope of the same magnitude) past that point. Their profit will be maximized if the VIX settles at exactly 25, while they will lose money if the VIX settles above 35.

  Of course, it's also possible that this "mystery trader" is using this position as a hedge against direct or indirect VIX exposure in the remainder of their portfolio.

• by quickthrower2 on 2/6/18, 2:19 AM

  Someone did well at the horses.