Naederhoffer SUES the CME

[The_Krakenite]

IIRC, with the Matador thing, he did get hit by the perfect storm, as often happens. Yes, I'll prob take criticism for this but...

• He got caught in the shit-show of 2007, (a lot of funds blew up there in the crisis)
• Vix was at just a 10, then went into the stratosphere
• CME then came at him and hit him with massive margin requirement increases

He got fucked and squeezed by every which way, and that doesn't even factor in those who were potentially trying to fuck him even harder when they knew he was hurting. Similar manipulation to the 1997 blow-up.

When all was said and done, he was hurting real bad, then Octane pulled out massive capital from his fund.

It was then liquidated returning the final 25% left of capital.

 

[TheDawn]

It was 2007 when he blew up for the 2nd time. And I doubt he had re-stocked back all the silver from the safe he had to pawn off after the 1997 fall-out. Remember, he had to mortgage his mansion?

So I guess he didn't win his lawsuit or got any settlement out of CME.

But, I'm just SPECULATING here (get it? Speculation, haw). The average investor will be screaming about blow-ups if they just lose half their equity. I think losing all the way down to just 25% of your equity pretty much counts in many people's eyes, but I know what you mean.

After Cordier the Options-King lost OVER 100% equity for clients, some may try to argue that losing 100% of capital isn't a true blowup because you haven't gone into negative territory. Haw!

Correction: Losing other people's 25% or 100% equity or capital. Aside from a bruised ego and anger from their investors and pressure to pay back the money they didn't really lose much plus they still had the fees that they collected from their investors for gambling their money. Out of the three offices in that Youtube video, Victor's office is still the largest. Considering that he did EXACTLY the same thing as in a very well-published story where another individual investor who lost everything and owed half a million to the brokerages after doing exactly the same thing exactly 10 years prior really makes it very hard for me to have any sympathy for him. The guy not only gambled with people's money but knowingly gambled with people's money because of an ego. He obviously thought what happened with the other investor 10 years prior could not happen to him because he is so much better. He went to the most prestigious Ivy League school Harvard, has a Ph.D. degree specializing in statistics, studied with the best, and was patronized by the elite in the financial field, George Soros, and with so much experience so whatever happened to that individual investor who was just a civil servant could not possibly happen to him. Except the market does not care about where you went to school, how much experience you have, how much money do you have, or how many degrees you have or who invests with you, it only cares about 1) whether you are right or wrong about the market direction, 2) how much are you right or wrong by and 3) how much you invested.

I can tell you that shorting strangles is NOT easy business. His book may make it out to be, but... alas. Trading nat-gas also goes by the name Widowmaker for a reason. I think John Arnold was right to get out of trading after making his first billion. Give these commodity guys enough time, and they will go the way of Brian Hunter.

Correction: Trading natural gas is not an activity that's widowmaker. Plenty of people trade natural gas and they all make their fortune fine. Trading short strangle with no hedging on nat-gas is a widowmaker. Hell doing short strangle on any instrument is a potential widowmaker if not at least a divorce maker.

 

[Laissez Faire]

Except the market does not care about where you went to school, how much experience you have, how much money do you have, or how many degrees you have or who invests with you, it only cares about 1) whether you are right or wrong about the market direction, 2) how much are you right or wrong by and 3) how much you invested.

Good post, but I disagree with this part as the market doesn't care about what you listed either as the market is completely impersonal and should be considered neutral.

The market f''ks no-one, but plenty of people f''ks themselves up by participating in the market for a wide variety of reasons.

 

[TheDawn]

My guess is he wasn't completely broke financially but broken psychologically to the point of being depressed.
Too many blowups will do that. Same happened to Livermore, was clearly depressed towards the end. The worse thing is to blowup towards the end of your career. Early on and you can still recover.

Livermore had no capital left after his last loss but I don't think Victor has no capital left. As long as he is still able, he can still make a comeback and he should. Large losses are very traumatic to a trader in that you constantly feel like there are huge rocks are your chest with all the guilt, frustration, regret, despair, self-loathing and ridicule, anger, loathing, contempt from others and these debilitating thoughts weigh on you 24 hours a day, 7 days a week. You will be lucky if your loved one stays with you to share the burden with you. If your loved one happens to leave you then you will be bearing the burden alone. It's devastating.

The ONLY way that you can get out of this devastation, get out under from those huge weights of losses is if you trade again and make your profit, no matter how small and slowly make back your losses until they are all gone. Even if you still make losses along the way but as long as you are making a profit, you will feel better because you know you are slowly chipping away the losses, one dollar, one cent at a time. As long as those losses are there and you are stuck with it, all those psychological traumas that come with it will always be there, weighing on you and eating away at you and I am not surprised if this is what Victor is feeling. That's why I say he should get out and start trading again when he's still got it. That's the only way that he will feel better again otherwise he will always be known and defined as someone who was good but blew up his investment funds twice and forever lost. If he comes back and trades again and makes up his loss even just partially he will be known as somebody who refused to be defeated by his losses and came back and made up his losses.

 

[Millionaire]

Livermore had no capital left after his last loss but I don't think Victor has no capital left. As long as he is still able, he can still make a comeback and he should.

They looked at brain scans, every time a person faces a very traumatic experience (think PTSD level event) the amygdala grows bigger, but it never shrinks back, no matter how many good experiences you have afterwards.
A trader (and people in general) can only take so many traumatic experiences before that part of the brain is fucked up for good and they become a very different person.

This is the haunting image of Livermore, 24 hours before he committed suicide.

He has the 1000 yard state, "tell-tale sign that one's senses have become so overloaded by prolonged fear and trauma that the nervous system can't process any more"

 

[Pekelo]

Obviously, the best way to approach trading/investing is the Cathy Wood style (aka losing others' money). Her fund is down like 50% or what and she is living it large and partying down in the Bahamas. Did you see her worrying or depressed?

 

[Millionaire]

Obviously, the best way to approach trading/investing is the Cathy Wood style (aka losing others' money). Her fund is down like 50% or what and she is living it large and partying down in the Bahamas. Did you see her worrying or depressed?

She doesn't have anything like the whole of her net worth in her own funds. So why would she feel stressed?

What drives super rich speculators like Livermore and more recently Bill Hwang to continue going for ever bigger balances.

I guess they love the game and the rush they get from it more than the money itself.

They do say the addictiveness of trading is what makes many traders give back trading fortunes and leave the game broke.

 

[Pekelo]

more recently Bill Hwang

There was no strategy there. He just over leveraged into a bad position.

Going back to Cathy, that is the trick. Risk not yours, and you will sleep better. These type of people's real talent is to convince others to give them money to invest.

Cathy is also a good example of not recognizing when one is more lucky then skilled. She took a few big positions in fundamentally flawed companies but got lucky. She just didn't notice when the tides turned and she keeps doubling down. Sounds like a crypto trader... (I think the jamboree down in the Bahamas was crypto related)

 

[TheDawn]

Obviously, the best way to approach trading/investing is the Cathy Wood style (aka losing others' money). Her fund is down like 50% or what and she is living it large and partying down in the Bahamas. Did you see her worrying or depressed?

She doesn't have anything like the whole of her net worth in her own funds. So why would she feel stressed?

What drives super rich speculators like Livermore and more recently Bill Hwang to continue going for ever bigger balances.

I guess they love the game and the rush they get from it more than the money itself.

They do say the addictiveness of trading is what makes many traders give back trading fortunes and leave the game broke.

Well I guess it depends on the people. I mean Victor was also managing other people's money; he is obviously feeling very down after losing other people's money.

 

[TheDawn]

They looked at brain scans, every time a person faces a very traumatic experience (think PTSD level event) the amygdala grows bigger, but it never shrinks back, no matter how many good experiences you have afterwards.
A trader (and people in general) can only take so many traumatic experiences before that part of the brain is fucked up for good and they become a very different person.

This is the haunting image of Livermore, 24 hours before he committed suicide.

He has the 1000 yard state, "tell-tale sign that one's senses have become so overloaded by prolonged fear and trauma that the nervous system can't process any more"

Losing money is traumatic for a trader but I wouldn't compare it to PTSD so do we really have amygdala growth in our brain after losing on our trades? I am not so sure. All I know is I feel better when I make back losses and I pretty much trade the same as usual. But if I have the losses forever stuck there and don't do anything to make them back then I will get depressed and start to question the reason for my existence.