Hedge-fund prodigy takes a $300 million hit
- Thread starter RedDuke
- Start date
AI's avoided Matador because he was tainted by the need to short index vol, naked. The guy is no dummy, but he is a bit of a degen when it comes to volatility. He could have structured stuff in long wings that made money within a few sigmas while maintaining his bias. He could have been in knockouts and be sitting on Soros size. Virtually infinite iterations of short-vol, long D1 that he could've chosen, but he went with short dgamma in SP par-puts. He's not very knowledgeable on the subject.
Interesting, i don't doubt it. you are far more knowledgeable than I am in derivatives.
What still perplexes me is that he surrounded himself with top notch people to help him manage the risk side but still blew up--- I will tell you some tales if we ever meet up. surf
Well there is no "out" to a $6 index put other than to cover it. You can spread it off, but nobody is going to do that at an edge-loss. If you're up on price it's only a $6 put, and if you're down the vertical will will turn the $6 credit into a debit. IOW, there is no decision to make if you're not questioning the PM on the initial trade.
You were allocating for a firm that had a risk-manager that had previously worked at Quantum. He asked me my "index gamma ceiling?" and I told him, "10,000." He was ok with that. That would be ok if you're running a few hundred million per strategy, but absurd for a fund with $100MM in AUM.
I don't disagree. You should come down for Battlefin this year, it may be worth your time.
You're supposedly an allocator -- so how do you reconcile that Matador never had more than $500MM, and as EPrado stated, the low-vol returns get the most capital? Astenbeck, for example, has $2B in AUM. Why does Bridgewater have $150B while returning 6%?
Einhorn, SAC, Simons,Tudor,......and on and on. These guys are basically base hitters (which considering the AUM they control they have to be) and attract all the big money. Blow up artists and home run hitters/strike out artists like VN never really get any AUM. Been like that forever. Look at some of the Trend Followers (whom I am a fan of), they have gigantic swings which scare away the huge investors.
Surf once again is clueless. Some "allocator".....LOL. Priceless.
She got an MBA from an elite school at 21. This is more proof that intelligence doesn't have that much to do with trading success than affirmative action related.
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This used to be true, but in recent years several lower-vol London trendies have attracted tens of $billions.
Sure, now those guys are hitting singles. But, tudor atleast, took outsized risks at the start of his career. These risks could have gone the other way ---
While i dont know for certain, i would bet every huge hedgee has taken big risks at first.
Yes, Tudor probably took bigger risks years ago. But things were a lot different back in the 80's. Look at his returns now, all single digit months. I'm sure in the 80's and early 90's some of these now huge traders did take more risk, but they were trading tiny AUM compared to now. No way in hell they could attract billions with + or - double digit returns every month.
You said that Wall Street rewards (allocates huge sums) to the biggest risk takers. That couldn't be further from the truth. Go to any of the sites that track CTA's and Fund Managers. The ones with crazy volatility are tiny compared to the big guys that are slow and steady. Wall street doe not anymore reward big risk. If so some of these CTA's would be managing billions.
You said that Wall Street rewards (allocates huge sums) to the biggest risk takers. That couldn't be further from the truth. Go to any of the sites that track CTA's and Fund Managers. The ones with crazy volatility are tiny compared to the big guys that are slow and steady. Wall street doe not anymore reward big risk. If so some of these CTA's would be managing billions.