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Money Goldman Sachs made a staggering $200 million in one day as markets plunged

07:45  24 may  2018
07:45  24 may  2018 Source:   cnbc.com

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The entire issue was privately placed by the US bank Goldman Sachs International (GSI) through off-shore Labuan, rather than on the open market . Given that $US 200 million could make a great deal of difference to the lives of many of the Malaysian taxpayers, who are under-writing this deal, should

2 days ago. For Henry Paulson however, that meant he would be forced to sell off his entire 1 % stake in Goldman Sachs in the middle of one of the hottest stock market rallies in recent history. Henry Paulson's $ 200 Million Deal / Alex Wong/Getty Images.

Lloyd Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc.© Provided by CNBC Lloyd Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc.

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 so-called VIX surged 116 percent, the biggest one-day move on record, as the S&P 500 Index plunged 4.1 percent and the Dow Jones industrial average dropped more than 1,100 points.

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The investment bank made millions by helping to hide the true extent of the debt, and in the process almost doubled it. The crisis was exacerbated years ago by a deal with Goldman Sachs , engineered by Goldman ’s current CEO, Lloyd Blankfein. Spend a Day in Court.

30, 2000, the company had . 1 billion in assets under management for 200 individuals and families and 0 million in See: First Republic pays a staggering sum for Luminous Capital, sources say, and shifts the Other former Goldman Sachs advisors are making big noise in the RIA marketplace.

a close up of a sign© Provided by CNBC

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 David Casner, a managing director 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.

Pushing for No. 1

Driven by their recent performance and investments in trading technology that are starting to pay off, Goldman equities executives are optimistic they can regain the No. 1 ranking they have ceded to rival Morgan Stanley by year end, according to the sources. J.P. Morgan Chase has also made gains against Goldman in recent years, a move that the investment bank's traders are eager to counter.

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The Goldman Sachs Group, Inc. ½ 200 West Street ½ New York, New York 10282. Revenues Investment banking Investment management Commissions and fees Market making Other principal transactions Total non-interest revenues.

The Goldman Sachs Group, Inc. ½ 200 West Street ½ New York, New York 10282. Goldman sachs reports first quarter Revenues Investment banking Investment management Commissions and fees Market making Other principal transactions Total non-interest revenues.

Goldman's volatility bet helped fuel the 38 percent increase in first-quarter equities trading revenue to $2.3 billion, exceeding results from Morgan Stanley and J.P. Morgan.

The firm is known for managing risks well, but such trading moves aren't without potential hazards. If the market had gone the other way, they were exposed to losses, similar to wrong-way bets in commodities stung Goldman in 2017.

Perhaps with his recent equity performance in mind, Goldman CEO Lloyd Blankfein defended his bank's beleaguered trading business when he spoke at a conference later in February.

"I don't think it would be a good strategic move to forgo the upside in the business from here," Blankfein said.

A spokesperson for Goldman Sachs declined to comment.

Related video: Goldman Sachs' CEO Blankfein to step down in December (provided by Wochit)

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