The unwinding of a large Cboe Volatility Index (VIX) options trade caused significant market turmoil on Tuesday, September 3rd. According to Nomura, this event led to a 'massive freakout' as market makers were forced to hedge their positions by buying volatility and selling stock-index futures. This hedging activity exacerbated the already escalating equity decline. The situation began with a large VIX options trade put on last week, highlighting vulnerabilities in the market when dealers face sharp moves in the gauge. Specifically, 350,000 contracts of VIX 22/30 delta strikes were bought on Friday for $0.25 and sold at $0.60, triggering a 20+ point bounce off the lows. Tuesday’s equity slump was a result of this volatility.