The former Target manager who made millions in a trade that just blew up wants you to know he’s doing just fine

Golden glanced at the marketing materials for the ProShares Ultra VIX Short-Term Futures ETF (UVXY) and decided to pass.

It was only when his email contact reached out a second time, months later, that the gears started turning in Golden’s head.

He researched the UVXY (which allows traders to bet on or against an imminent rise in stock market volatility), scouring countless materials and speaking with industry experts before trying his hand at trading the complex and frequently misunderstood volatility fund.

“It took a little bit of time for me to actually pull the trigger on my first trade, and it kind of just evolved from there,” Golden told Business Insider in a phone interview. “I learned how it worked on the surface, then started modeling for specific adverse shocks.”

He configured a strategy that amounted to a bet against wild swings in the equity market — that is to say, he was positioned for relatively drama-free stock trading. And he started doing this as stocks were settling into what’s now a nine-year bull market. He made a fortune and claims he grew his net worth from to $12 million from $500,000 in five years.

With results like that, and based on the millions Golden has said he’s made using the trade, it’s easy to see why so many people are so curious about how he conducts his business.

Trial by fire

Interest in Golden and his short-volatility enterprise was never more apparent than during the stock market‘s 10% correction at the start of February.

While all major US indexes took swift beatings, readers repeatedly made an inquiry to Business Insider: What’s happening with Seth Golden?

They remembered our initial report on him, which highlighted his success. And they wanted to know how he was faring through the market turbulence.

Golden says he did just fine. A combination of good timing and caution heading into the year helped ensure the markets sudden swoon didn’t hit him too hard.

He says he recognized volatility wouldn’t stay locked near record lows forever. And since he’d already doubled his investments the previous year — thanks to a largely motionless market — he entered 2018 in a defensive stance, braced for turmoil.

So, he calibrated his portfolio to reflect his expectation for more price swings, holding only 13% in short-volatility products, lower than his average exposure of 20%. And while Golden declined to provide exact profit-loss figures for how he fared or show Business Insider any financial statements regarding the trades, he said his positional paring “proved to be a decent enough advantage” — although he readily admits the whole ordeal was “not terribly comfortable.”

Market enthusiasts following Golden’s situation may be surprised to learn that the portion of his portfolio not used for shorting volatility is mostly held in cash. The fact that he entered the correction period with just 13% of his capital in play would also suggest his overall net relatively insulated from the damage.

Golden uses that cash balance to increase short positions when the Cboe Volatility Index (VIX) spikes — betting on an eventual (and often quick) return to lower levels. He did that, he says, when the VIX more than doubled during the February correction, raising his short-volatility exposure to his usual 20%.

Sure enough, since more than doubling in a matter of days, the VIX has declined 50% from those recent highs.

Now that we’ve established how Golden builds his positions, the question becomes, how does he know when to cut and run? He has a system for that too.

“I have a platform that signals when my positions go into the 90% profit profile, and it’s at that point where you question whether it’s worth holding on, so I dispose of those,” he said in the days following the market correction. “Then I have to figure out when to put my next layer on, to recoup the exposure I want. That’s my hardest job.”

Avoiding a market landmine

No discussion of the early-February stock correction is complete without a mention of the two short-volatility funds that imploded, erasing billions of dollars of value and exacerbating marketwide selling pressure.

The sharp surge in the VIX was the ultimate undoing for the VelocityShares Daily Inverse VIX Short-Term ETN (XIV), which was dissolved as a result. Meanwhile, the ProShares Short VIX Short-Term Futures ETF (SVXY) is still alive and kicking, albeit at a far lower price than before.

When this happened, the inquiries flowed anew: What does this mean for Seth?

He says the answer is simple: He didn’t own either instrument.

Rather than purchase products designed to return the inverse of the VIX — like the ones that imploded — Golden prefers to bet against the price of long-volatility funds.

“I never found an appreciation for their [net asset value] NAV, or their indicative value threshold,” said Golden. “When they do decay — when the market falls and volatility spikes — they suffer from a great deal of beta slippage. Those are two characteristics that don’t work for me.”

The responsibilities of a poster boy

When word got out about Golden’s success as a volatility investor, media coverage turned him into a minor celebrity of sorts. New York Times DealBook and DealBreaker wrote pieces, while financial blog ZeroHedge took a more pessimistic angle, suggesting Golden was “the harbinger of the latest Fed-induced equity bubble.”

The attention made Golden a figurehead of sorts for investors and aspiring traders who exist outside the Wall Street complex. He says he fields “countless emails, phone calls, text messages, Twitter comments, and StockTwits comments” every day, many of them from people seeking advice. And he’s happy to respond to them.

“Being accessible to people is what I’ve always been about,” he said. “Sometimes I don’t even have enough time to check my own emotions. I’m up until the wee hours of the night answering messages of all sorts.”

That said, Golden is exploring ways to monetize the wisdom he so readily provides. Right after Christmas 2017, he launched a boutique financial-research site called Finom Group. Golden says the site will be centered on the volatility complex, while also offering social elements for subscribers.

‘A huge yacht and everything’

So who was Golden’s mystery benefactor — his email pen pal who planted the short-volatility seed that’s since flourished into a multimillion-dollar trading enterprise? Golden won’t tell.

And in a way his reluctance to reveal the source adds to the urban legend of sorts that’s cropped up around Golden, who’s based in Ocala, Florida. He’s known to the financial public as the former Target manager who made millions shorting volatility, and his unique combination of success and everyman appeal have made him a kind of poster boy for the trade.

Nudged further, Golden does provide some details, however vague, about his short-volatility guardian angel:

“He’s since retired with many, many millions, and he moved to New Zealand, where he has a huge yacht and everything,” said Golden, who himself owns a vacation home in Naples, Florida.

‘I’m not that guy on Wall Street’

While Golden is enjoying the rapid ascent of his star as a trader and research provider, he wants to set the record straight on something he thinks has been exaggerated during his extensive media coverage.

He didn’t quit his job as a Target manager one day and then become an investment expert the next — although that’s frequently how he says his career path has been framed. Golden emphasizes that he’s been in the investment game for 19 years, including his career at Target. Even when he was working as a low-level executive at Target, his coworkers were hip to the double life he led as a trader.

“Most of my peers knew investing was truly my passion,” he said. “They knew that if I wasn’t roaming the sales floor, I was probably in my office trading. They’d ask, ‘Why are you here?'”

At the same time, Golden recognizes his Target past is what makes him so relatable, and what’s piqued the interest of so many aspiring investors. That’s why he’s so willing to be a resource for others looking to follow in his footsteps.

After all, tucked away in the palm-tree-lined central Florida city of Ocala, he’s about as far from Wall Street as it gets.

“I want to show people that they can do this,” he said. “I’m not that guy on Wall Street. All I do is pay attention, dedicate myself, and do the work. I’m just terribly decent at what I do.”