Boom times have returned on Wall Street, at least for one trading desk.
Goldman Sachs made $200 million in profit on a single day this February as calm in stock markets was shattered with a historic surge in volatility, according to people with knowledge of the move. That's on par with what the firm's derivatives unit typically makes in an entire year, said the people.
The investment bank had positioned itself to benefit if the Cboe Volatility Index, the product sometimes called the "fear index" because it reflects expectations of future volatility, climbed, said the people, who declined to be identified speaking about internal matters. After months of tranquil markets, on Feb. 5 the VIX surged 116 percent, the biggest one-day move on record, as the S&P 500 plunged 4.1 percent and the Dow Jones industrial average dropped more than 1,100 points.
As a result, Goldman's hedge fund and asset management clients clamored for VIX exposure on the chance it would climb further, and the New York-based bank's positions were suddenly highly profitable.
It was a boon for Goldman's flow derivatives group, run by managing director David Casner, who joined in 2002. The business, a team within Goldman's larger equities division that trades securities like VIX options, had been stung in recent years by calm markets and regulation. During all of last year, the bank's entire trading business exceeded $100 million in revenue on just four days, the company said in February.