Market volatility has fallen markedly as measured by the CBOE Volatility (VIX) Index. VIX is a real-time index that represents the market expectation for near-term volatility in the S&P500 index.

Investors and traders have long used VIX as a measure of the level of risk, fear or stress in the market.

Today, we’re going to look at a long call butterfly using VIX options as a way to profit if volatility jumps up again in the next few weeks.

A long call butterfly is constructed through buying a call option, selling two higher calls and buying one call even higher.

The trade is entered for a net debit meaning the trader pays to enter the trade. This debit is also the maximum possible loss.

Usually, a butterfly is placed roughly at-the-money, but today we are looking at placing it out-of-the-money.

Using the May 16 expiry, the trade would involve buying the 20 strike call, selling two of the 25 strike calls and buying one of the 30 strike calls.

The cost for the trade would be around $40-45 which is the most the trade could lose. The maximum potential gain is $460, which would occur is VIX closed right at 25 at expiration. The lower breakeven price is 20.50 and the upper breakeven price is 29.50.

There are three general outcomes with this butterfly.

• VIX below 20.50 – Trade loses $45. This scenario should be reasonably acceptable for most investors. While the option trade suffers a full loss, hopefully stocks have been stable or rising.
• VIX between 20.50 and 29.50 – Good for the VIX butterfly, but potentially bad for stock portfolios.
• VIX above 29.50 – Full loss on the VIX trade and potentially big drops in stock portfolio.

So, VIX above 30 is the main scenario that hurts in this case, but how likely is that? We’ve only seen a VIX reading of above 30 on a handful of days in the last six months.

Using VIX options can be simple and cheap way to buy some protection against a mild selloff in stocks between now and mid-May. The trade can be placed relatively cheaply at $40-45 per contract.

VIX options behave differently to regular stock options, so it is important that any trader using this product fully understands the risks involved. As always, do your own research and due diligence before risking any of your hard-earned capital.

Please remember that options are risky, and investors can lose 100% of their investment. This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.

To help battle against the multi-trillion-dollar financial crime industry, firms themselves take steps toward solving the problem. One way organizations have responded is by expanding their “Know Your Customer” (KYC) efforts.

KYC references a set of guidelines that financial institutions and businesses follow to verify the identity, suitability, and risks of a current or potential customer. The goal is to identify suspicious behavior such as money laundering and financial terrorism before it ever materializes.

KYC regulations originated from years of unchecked financial crimes. The initial guidelines were drafted in 1970 when the U.S. passed the Bank Secrecy Act (BSA) to prevent money laundering. Notable additions came years later, after the Sept. 11, 2001 terrorist attacks and 2008 global financial crisis.

The regulations put in place over the years have required firms to monitor client behavior regularly. And there is no exception for not complying. Any company—including banks, insurance companies, and creditors—with exposure to client risk must develop a KYC strategy for engaging with customers.

What are the requirements to “Know Your Customer”?

The “Know Your Customer” framework contains three steps: customer identification program (CIP), customer due diligence (CDD) and enhanced due diligence (EDD).

Customer Identification Program

At the minimum, firms must pull four pieces of identifying information about a client, including name, date of birth, address, and identification number.

Most firms take additional steps in their screening process. Many will make sure that clients do not appear on government sanction lists, politically exposed person (PEP) lists, or known terrorism lists— those who do appear usually require enhanced due diligence.

Other items considered at this time include financial transactions, which firms use to separate potentially risky behavior from regular business activity.

Much of this information comes from various reporting agencies, public databases and third-party sources.

Customer Due Diligence (CDD)

Customer due diligence is the process of classifying all the information collected during the Customer Identification Program.

Firms examine the nature and beneficiaries of existing relationships to ensure all activity is consistent with historical customer information.

The goal is to obtain enough information to verify a customer’s identity and assess their riskiness. Since financial crime happens quickly, firms frequently monitor this information for unusual spikes in activity or changes to sanction lists. Most clients pose little to no risk, but the few who do are subject to enhanced due diligence.

Enhanced Due Diligence (EDD)

If a customer is believed to pose additional risks, firms take extra steps to gain a better understanding of their motivations. A high-risk person may include those with political exposure or relationships with designated persons. Even someone in a high-risk country can raise a red flag for compliance.

In practice, firms must demonstrate a deeper understanding of the high-risk clients identified by a standard customer due diligence program. Some of the information required to perform enhanced due diligence includes a source of wealth verification, detailed management reports and relevant third-party research.

“This feat of going below 2 hours in a marathon seemed impossible. I can say that I am the happiest man in the world. The final stretch of Eliud (Kipchoge) was a glorious moment. It was one of the many expressions around what happened days ago at the Prater circuit, in the heart of Vienna, when the famous Kenyan athlete produced the “unique moment” for athletic history, although for regulatory reasons it is not valid as a record. But that phrase, signed by Kipchoge himself, came from the man who financed the project, the British billionaire Jim Ratcliffe, owner of the petrochemical multinational Ineos.

For Ratcliffe, the US$15 million invested in that “1h59m40s” does not represent much. Ineos, founded two decades ago, today has a presence in 24 countries and an annual turnover of 53 billion euros. It manufactures petrochemicals and exploits oil and gas. The global publicity that represented Kipchoge’s challenge or, months earlier, the consecration of his cycling team Ineos in the Tour de France is unprecedented for them.

Ratcliffe, who was proclaimed Knight of the British Empire by Queen Elizabeth II, is now considered the largest personal fortune in the Kingdom, with 24 billion euros according to the British press, although Forbes indicates a slightly lower figure. With his extended fortune, his constant negotiations and some political incursions, Ratcliffe is not at all concerned about the discussion around the “Ineos 1.59” that brought Kipchoge back to the forefront of world sport until he became a celebrity. They feel “we’re here to make history,” period.

The regulatory controversies are left aside: the use of “hares”, the self-guide with its laser pointer marking route and times, hydration at will. And the already famous “flying shoes” (the Nike Zoom X Vaporfly) in its new Next model, which would allow to reduce the total time of the race between 1 and 2 minutes. “For me -replica Ratcliffe- one of the most significant issues is that the hares were some of the best athletes in the world, used to rival each other and not help. You only see that in cycling.

Specifically: Ratcliffe gave Dutchman Jos Hermens, Kipchoge’s manager, all the necessary resources. And he asked him to organize everything for his racer to run below 2 hours: “hares”, slippers, the ideal climate, the right circuit. The right moment. “El Momento Bannister”, as it was called in homage to the legendary middle-distance runner, also British, who was the first to break the 4-minute barrier in the 4 miles, far away in the 50’s. “Two things in life amuse me: sport and extraordinary challenges”, was Ratcliffe’s synthesis.

And that’s why his investments in sport have accelerated in recent times: soccer, cycling, motor racing, sailing. It is said that he was behind the purchase of the powerful Chelsea, but his offer of 2,300 million euros did not conform for now to another tycoon, the Russian Roman Abramovich. In football, then, Ratcliffe devotes himself to minor investments: first he bought Lausanne, from the second Swiss division (in “gratitude” to a country that received him when he had tax problems in his own). And recently Nice, from the first French division, with the dream of facing PSG later. But the biggest advertising hit was her entry into cycling.

From this year on, Ineos finances the main team of the world circuit, based in Great Britain. This is a project that emerged a decade ago to turn his country into the power of cycling. And they have done it, winning 7 of the last editions of the Tour with names like Chris Froome (4 titles), Wiggins, Gerant Thomas and, a few months ago, the Colombian Egan Bernal. That project was sponsored by Sky, owned by Rupert Murdoch. But since 2019, Ineos has taken over with an annual investment of US$40 million and the upcoming incorporation of another Latin American phenomenon, Ecuadorian Richard Carapaz, winner of the Giro d’Italia.

“Cycling is popular, one of the most considered sports in society. It associates exercise and people’s health, and fights pollution in cities,” Ratcliffe said, justifying his heavy investment. Born Oct. 18, 1952 in Failsworth, Ratcliffe often mentions that he spent a humble childhood in a state-subsidized home, with his father working as a carpenter during the post-war period and his mother, a simple accountant.

But Jim graduated as a chemical engineer from the University of Birmingham and completed it with an MBA in finance from the London Business School. His first job was in Esso, although he considers his time in the financial Advent in the United States to be fundamental: there he learned how to handle negotiations; it would be his transformation.