Entering text into the input field will update the search result below

Suspicion of VIX manipulation

May 25, 2017 10:14 AM ETVXX, VXZ, XXVFF, VIXY, VIXM, CVOL, XIV, VIIZ, VIIXF, TVIZ, XVZ, IVOP, UVXY, SVXY, VMAX, VMIN, TVIXF, ZIVZFBy: Stephen Alpher, SA News Editor136 Comments
  • via the WSJ's Ben Eisen
  • According to a paper from two University of Texas researchers, a quirk leaves the volatility market vulnerable to a sophisticated trade involving pushing around the prices of underlying S&P 500 options in order to manipulate the value of VIX derivatives as they settle.
  • "This market is fairly unique because you’ve got a very liquid market that’s settling based on the price of a less liquid options market,” says one of the authors.
  • A hypothetical example: A trader long $2M of VIX futures, wanting to push prices higher prior to settlement, could spend $1M overpaying for S&P 500 options at the settlement auction, driving up the price of the contracts used to calculate the VIX. Any money lost on the S&P options trade would be gained doubly by the VIX derivatives (where twice as much are owned).
  • The CBOE says the work is based on "fundamental misunderstandings."
  • ETFs: VXX, UVXY, TVIX, XIV, SVXY, VIXY, ZIV, VXZ, VIXM, CVOL, VIIX, XVZ, XXV, TVIZ, IVOP, VIIZ, VMAX, VMIN

Recommended For You