How to lose 7.2 billion?

Quote from Mvic:

Apparently SGs best trader was chargeed with unwinding the position! Hah, most of these traders at IBs would fall flat on their face if they faced the long odds that retail traders do.

Here's basically how they should have unwound the trade.

1. Bought a huge quantity of puts.
2. Let the world know they have some massive long position that needed to be unwound due to a rouge trader tanking the markets even more.
3. Start selling every rally, just crushing it (proably the opposite of what they dd)
4. When they were done selling close out the puts and buy calls.

Their HUGE edge was that they had a market moving position and only they knew when they were done unwinding it. So muh for the brilliant IB traders.
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Right on target. at a small minimum they could have lowered the loss.

I would add that they could have sold calls and bought puts to begin but thats just adding to it.

maybe giving the bank a little more time to unwind would have helped put into place offsetting options but it appears they just knee jerked. Some serious jr high trading (and that was the best trader they have???)
 
It`s nice in theory, but remember SG doesn`t have a garantee that the Fed will intermeeting cute 75 basis points, pretty rare event to base your whole trading strategy on. How much pain were they willing to take, if the Fed didn`t follow up with a cut, the situation in Europe could have been exacerbated the following tradind day, panic begets more panic, stops hit, computer sell programs,etc.


The fed action changed the momentum, but in retrospect, it does appear that there were other options available to SG to liquidate in a more orderly fashion, but remember Amaranth, once traders know somebody is in trouble, they make it twice as hard to get out of those positions. See Mr. Arnold
 
Mr. Kerviel had better tread verrry carefully from now on.
If he commits just two more disciplinary infractions of equal or greater magnitude, SocGen would gain full authority under French law to petition the State Labor Board for permission to fire him! :eek:
 
Quote from Rearden Metal:

Mr. Kerviel had better tread verrry carefully from now on.
If he commits just two more disciplinary infractions of equal or greater magnitude, SocGen would gain full authority under French law to petition the State Labor Board for permission to fire him! :eek:
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lol that made me laugh:D i love the frenchies!
 
Quote from Rearden Metal:

Mr. Kerviel had better tread verrry carefully from now on.
If he commits just two more disciplinary infractions of equal or greater magnitude, SocGen would gain full authority under French law to petition the State Labor Board for permission to fire him! :eek:
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Please, give my fellow frenchman Jerome a break...

Everybody knows a lot of good traders blow up at least once...Not a reason to take such a drastic decision...

:D
 
Quote from DannyBly1:

I didn't realize that Kerviel was actually up big too at several points - in December he was actually up 1.4 billion Euros! Quel disastre....
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He probably read somewhere that you should "let your profits run".
 
Quote from Pekelo:

Not to mention had they held the position for 2 more weeks they would be in the green right now....
Although it is debatable just how much of the first .75 points fed's rate drop was as a result of their unwinding...

But they should have been able to lock in the loss of 1.5 billion Euros...
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That .75 cut was all because of socgen. I remember looking at the oversees markets that sunday night and saying to myself "if the FED doesnt cut big by tomorrow the dow will crash".
 
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