An alternative investment manager dubbed “ 50 Cent ,” who had been reported to be accumulating a large position in CBOE VIX options used to hedge against stock market volatility, has been doing so as a regular course of action, according to a source familiar with the matter who spoke to ValueWalk on the condition of anonymity. But the VIX options are not their only form of hedging protection. The hedge is reported to have cost $89 million on the strategy, but Ruffer continues in an uncertain market environment. Hedges are typically offset by exposure in negatively correlated assets such as stocks.

50 Cent Hedge Ruffer Vix
By Alex Const (originally posted to Flickr as 50 cent) [CC BY 2.0], via Wikimedia Commons

VIX options in 50 Cent portfolio are only a small percentage of the hedge, which includes index-linked bonds and gold

50 Cent, a nickname given to an investor who consistently purchased VIX call options that cost 50 cents near the 20 strike price, was unmasked Thursday.

The Financial Times first reported that Jonathan Ruffer, co-founder of a $20 billion London-based discretionary fund manager for private clients, trusts, charities and pension funds bearing his name, “has been systematically buying up derivative contracts linked to an index known as the Vix, according to four people from trading departments at banks who are familiar with the trades.”

A source with direct familiarity into the execution of Ruffer’s strategy, while not commenting on the accuracy of the FT article, told ValueWalk Ruffer has been purchasing VIX calls for its core fund and clients throughout 2017 to protect against market volatility and the strategy of buying VIX call options has been done “from time to time in previous years.”


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