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A $17.5 million payday on a $200,000 bet

VIX surge hands 8,600% profit to a tiny hedge fund in Colorado

Gulf News

Denver

Not everyone got crushed when the market collapsed.

For traders at a little-known Denver hedge fund who saw it coming, it was the score of a lifetime — a $17.5 million payday on a $200,000 bet.

“People were laughing at us, saying this could never happen, this should never happen,” Justin Borus, the 41-year-old founder and manager at Denver-based Ibex Investors, said in an interview. “We saw people pricing this as a 1-in-5,000 event, but it was more like a one-in-five-year event.”

Borus’s team bet that an exchange-traded fund linked to a calm stock market would go to zero in the event of suddenly volatile trading. The ETF almost did — it lost 96 per cent of its value.

Borus said they always believed in the wager, even when just about no one else did. But the jackpot still caught them by surprise. Two of the group — Ari Rubin and Cooper Stainbrook — were taking a long walk around the Colorado capital when the market started to go haywire on Feb. 5.

As they walked, the two of them — Ibex’s director and chief data scientist — were on the phone with a client and in passing mentioned rare, so-called black-swan events. The client told them to check out the VIX Index. One was happening as they spoke.

Extreme Velocity

“We came back to our screen and we’re watching the VIX and it’s moving with extreme velocity,” said Rubin, a ski bum turned money manager. “We’re laughing at every tick up until we realised what was going on. Cooper just looks at me and goes, ‘Oh man. The Vol-pocolypse just happened.’”

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