LJM Preservation and Growth Fund, collapsed by 82 percent! (WTF?)

jtunner · May 23, 2018

What is interesting is that their fund was already down -4.74% in January. For those trading at the time, were to crack in the short vol trade already starting to show?

RedDuke · May 23, 2018

Maverick74 said:
You keep saying this but it's absolutely not true. I've told this story several times about a guy at my old prop firm that sold teeny puts in the SPX 700 to 800 handles OTM. I got on the phone with him and warned him, that if we should have a sharp downside move and those puts went $5 or $10 wide, I would go into his account and start lifting offers. He assured me that he backtested this over 20 years and no such move ever took place. I tried to explain to him the issue is not the move itself, but the lack of liquidity. Sure enough 3 months later a streetful of Greeks were throwing rocks at the police on live CNBC coverage. That afternoon we had the flash crash. The 700, 800 and 900 strike puts he sold for .10 went $20 offer. I was a man of my word. I blew out his account. I didn't hit the $20 offers. But I paid $10 all the way back down to $3. Still blew out 100% of his capital.

I told him this is exactly what would happen. Traders never listen to those with more experience. They think they have it all figured out. So please stop saying this has never happened before. It has and it will happen again. Because that's exactly what markets do, rinse and repeat...over and over again. The moves are always the same, only the names of the victims ever change.

Mav I then stand corrected. I personally never seen it or heard about it. 9 points for 1000 points away expiring in 4 days. When did your story take place? And what time it happened? Want to look at the data and compare it to Feb 6.

Maverick74 · May 23, 2018

RedDuke said:
Mav I then stand corrected. I personally never seen it or heard about it. 9 points for 1000 points away expiring in 4 days. When did your story take place? And what time it happened? Want to look at the data and compare it to Feb 6.

May 6th, 2010. About 1pm eastern time.

Maverick74 · May 23, 2018

truetype · May 23, 2018

Preparing for a comeback... In letters to clients this month, Caine, a veteran of the 1990s technology boom who later went into finance, said he had planned to resume investing despite the losses.

Maverick74 · May 23, 2018

truetype said:
Preparing for a comeback... In letters to clients this month, Caine, a veteran of the 1990s technology boom who later went into finance, said he had planned to resume investing despite the losses.

Are you f*cking serious?

RedDuke · Jun 2, 2018

Maverick74 said:
You keep saying this but it's absolutely not true. I've told this story several times about a guy at my old prop firm that sold teeny puts in the SPX 700 to 800 handles OTM. I got on the phone with him and warned him, that if we should have a sharp downside move and those puts went $5 or $10 wide, I would go into his account and start lifting offers. He assured me that he backtested this over 20 years and no such move ever took place. I tried to explain to him the issue is not the move itself, but the lack of liquidity. Sure enough 3 months later a streetful of Greeks were throwing rocks at the police on live CNBC coverage. That afternoon we had the flash crash. The 700, 800 and 900 strike puts he sold for .10 went $20 offer. I was a man of my word. I blew out his account. I didn't hit the $20 offers. But I paid $10 all the way back down to $3. Still blew out 100% of his capital.

I told him this is exactly what would happen. Traders never listen to those with more experience. They think they have it all figured out. So please stop saying this has never happened before. It has and it will happen again. Because that's exactly what markets do, rinse and repeat...over and over again. The moves are always the same, only the names of the victims ever change.

I purchased CBOE data for May of 2010, and the prices (what ever was traded) were no where near Feb 6 of this year. So yeah, the prices during this event were unprecedented.

Maverick74 · Jun 3, 2018

RedDuke said:
I purchased CBOE data for May of 2010, and the prices (what ever was traded) were no where near Feb 6 of this year. So yeah, the prices during this event were unprecedented.

You got bad data. When I blew our guy out the spreads on .10 puts the day before were $20 wide. Yes, 20 dollars on puts there were nickel bid at ten cent offer the day before.

RedDuke · Jun 4, 2018

Maverick74 said:
You got bad data. When I blew our guy out the spreads on .10 puts the day before were $20 wide. Yes, 20 dollars on puts there were nickel bid at ten cent offer the day before.

Strange, it came straight from CBOE? Do you happen to remember strikes and expirations on those puts?

Maverick74 · Jun 4, 2018

RedDuke said:
Strange, it came straight from CBOE? Do you happen to remember strikes and expirations on those puts?

Not exactly. I believe SPX was around 1200 at the time and these puts were staggered like 700, 800, 900, etc.