How do you lose $5 billion in one week?

Quote from riskarb:

A large portion of Hunter's comp was left in the fund.
More...
Interesting. Would you know roughly what percentage was left in the fund and whether this might have been part of his compensation agreement?
 
Quote from Dogfish:

I like the last line of the article, "they prided themselves on their risk management"
More...

Probably there's a fundamental problem with Hunter's trading model/ strategy.

Q
This week's implosion was not the first for Hunter, says Kuntz. "He had a previous blowup at Deutsche Bank that the CEO of Amaranth told us they were quite aware of when they hired him. They said they ran the checks and he completely checked out," Kuntz says. "They prided themselves on their risk management."
UQ
 
Quote from Ticketwatcher:

A familiar cry heard sometime before the fall.<p>Stops! Stops! I don't need no stinkin' stops.
More...

Sorry but stops don't work when you have positions that are much BIGGER than the market can handle because of illiquidity.
 
Quote from Thunderdog:

Interesting. Would you know roughly what percentage was left in the fund and whether this might have been part of his compensation agreement?
More...

I haven't a clue. I was told this by a former Amaranth investor. I doubt it was contractual, however.

Amaranth Funds are trading on hedgebay.com The bids are rising a bit now that Citadel has agreed to buy the energy portfolio. Ken Griffin has got some balls.
 
Quote from pv150:

Same way you lose 500 or 5000 in a week... :eek:

I've heard that their trade was profitable. Illiquidity was the problem...more specifically GREED.
More...

And I'm sure their entry into that giant trade had some play in moving the markets in their direction. Thats probably why these season changing months' spreads have been SOOO wide.
 
Quote from HoundDogOne:

Actually...
It's almost as hard to lose $5 billion in one week...
As it is to make $5 billion in one week.

People do not easily realize...
That if you can deliberately lose money ** via a trading strategy **...
Then you can just flip it and make money.
More...

Once the market knows you are in too deep on a trade, they won't let you escape. Their liquidation probably marked the low in Natgas.
 
Some guy was the teevee this morning saying that the kid put on a huge time spread (it wasn't a directional play) and word got out on the street. So naturally all those other traders wanted to "help" him.
 
You must log in or register to reply here.
Back
Top