How to lose 20 Billion in 2 days

His strategy might have fared significantly better had his capital been $20 million instead of $20 billion I guess, with lower market impact on liquidation. That said, going unhedged with that amount of leverage in a few individual names overnight is just asking to be blown out eventually, which when you're borrowing billions is a terrible idea.
 
maxinger said:
How to lose 20 Billion in 2 days !
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How to gain 20 Billion in 2 days ?
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He wasn't betting additively, he was betting multiplicatively, and aggressively at that (even scaling his last trade all the way up to maintain max leverage). While the exponential process is very powerful and can make you infinitely rich [ignoring capacity constraints], a blow out of that scale is terrible since previous profits will be wiped (and more). Had he started betting additively at some point he would have accumulated a buffer by now to use in this situation, but it would also imply less leverage used => didn't suit him since even at $20 billion he felt he wanted to get richer FAST.
 
Snuskpelle said:
He wasn't betting additively, he was betting multiplicatively, and aggressively at that (even scaling his last trade all the way up to maintain max leverage). While the exponential process is very powerful and can make you infinitely rich [ignoring capacity constraints], a blow out of that scale is terrible since previous profits will be wiped (and more). Had he started betting additively at some point he would have accumulated a buffer by now to use in this situation, but it would also imply less leverage used => didn't suit him since even at $20 billion he felt he wanted to get richer FAST.
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Nice! So what was he investing in so aggressively? Thanks!
 
Saltynuts said:
Nice! So what was he investing in so aggressively? Thanks!
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Quick summary (IIRC, you better go read corresponding articles): The bet that triggered the cascading blow up was Viacom CBS, on it announcing a surprising new issue of stock. The trade was actually structured using opaque CFDs, with Archegos Capital having margin with lots of different banks to achieve higher maximum leverage. As Archegos had been unable to meet the margin call, Goldman started a fire sale ahead of other banks. That caused the other stocks in the position to start tanking as well, and naturally panic broke out with all banks involved trying to liquidate ASAP. In the end, the fills achieved were significantly worse than what the stocks had been trading at market for prior to the event (hence catastrophic losses).
 
Snuskpelle said:
He wasn't betting additively, he was betting multiplicatively, and aggressively at that (even scaling his last trade all the way up to maintain max leverage). While the exponential process is very powerful and can make you infinitely rich [ignoring capacity constraints], a blow out of that scale is terrible since previous profits will be wiped (and more). Had he started betting additively at some point he would have accumulated a buffer by now to use in this situation, but it would also imply less leverage used => didn't suit him since even at $20 billion he felt he wanted to get richer FAST.
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Right.

he over-traded.
 
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