Neiderhoffer

[Pekelo]

Quote from marketsurfer:

im sure the investors are aware of the risk.

They must have been.

Matador is on record going from +30% to -12% between 2006 May-July, while the market went from top to bottom only 10%. So anybody who still had money with Vic this year should have known what kind of strategy he was using and the risk involved. They still had another scare back in February, when the market went from +3% to -3%, and I assume so did Matador with a 4-5 leverage.

If those incredibly sophisticated investors decided to stick with Vic even with those numbers and DDs, they don't have anybody to blame, but themselves....

 

[Pa(b)st Prime]

Quote from marketsurfer:

thanks, pabst, for a non attack post.

i'll defer to you and atticus for the technical option stuff at this level.

VN is not paid to grind out 10% a year, he is paid to take risk to earn outsized returns--- im sure the investors are aware of the risk. im also sure that VN was aware of the potential risks, perhaps a perfect storm of margin raising and redemptions did matador in?

surf

You're still missing the point Dave. Most premium selling funds (and there's a plethora of them) don't really manage anything. They just sell the shit and prey. Forget delta hedging. At best they roll down.

The Ph.D.'s on the "team", the books, the Harvard/UofC MBA, the no shoes or talking because we're serious thinkers is all part of the con. Think Sting. Vic's investors are Doyle Lannigan. Greedy guy's who met their match in an articulate, pompous, diploma heavy grifter.....

 

[marketsurfer]

Quote from atticus:

I went debit to the tune of $2MM in 2000; a peak to trough swing of $9MM, so I am nobody to preach on the subject. It was cash I had accumulated over 15 years. The difference is obviously magnitude, but mostly the fact that not a penny was OPM, although there was some corp-financing. I no longer trade w/o wing-stops, that's what I learned.

I got taken out, pure and simple. Nobody to blame but your's truly.

thanks, atticus, interesting.

is there a way for someone trading VN's size to continually earn those types of returns without the risk of blowup?

what would you suggest??

surf

 

[sprstpd]

Quote from marketsurfer:

how about if they changed the rules when your team was already down, then your star quarterback decided he didn't want to play any longer quiting?? so the managers decide to give up, just when you were close to the winning touchdown??

surf

But from the short history I've seen, this is what happens when you are overleveraged and other people know about it. It has always happened and will continue to happen (LTCM, Amaranth). To act like the rules changed or this is some big surprise is just ignorant.

 

[wareco]

Quote from marketsurfer:

...but facts are he has earned far more over the years than he has lost this time.

Yeah, that 2 1/2 plus 20 kind of takes the sting out of blowing up doesn't it?

 

[atticus]

Quote from marketsurfer:

thanks, atticus, interesting.

is there a way for someone trading VN's size to continually earn those types of returns without the risk of blowup?

surf

Absolutely. I've done better with OPM and limited-risk than I ever did swinging. Short gamma need not include unlimited risk. My largest trade in retail was a $30k debit which paid off 900k in bond ops. Any legitimate PB would have access to the primary dealers in equity-exotics. SocGen or JPM would have written a No Touch for Vic at the Mar 1000 strike. A 400-point OTM bull NT for April is priced 82/100 cash, no limits. He could've bought a var-swap, as there was an implied-floor at VIX=10 and written puts to his heart's content.

 

[marketsurfer]

Quote from atticus:

Absolutely. I've done better with OPM and limited-risk than I ever did swinging. Short gamma need not include unlimited risk. My largest trade in retail was a $30k debit which paid off 900k in bond ops. Any legitimate PB would have access to the primary dealers in equity-exotics. SocGen or JPM would have written a No Touch for Vic at the Mar 1000 strike. A 400-point OTM bull NT for April is priced 82/100 cash.

thanks. im out of my league here, but, would not the no touch seriously dampen the returns due to its cost?? can you explain 82/100 cash cost?
what would it have cost for a no touch to protect VN's size at the time?

plus, these no touch exotics would have had to have been purchased consistenly over the years, as no one knows when the perfect storm will occur. right???
surf

 

[sprstpd]

Quote from marketsurfer:

how about if they changed the rules when your team was already down, then your star quarterback decided he didn't want to play any longer quiting?? so the managers decide to give up, just when you were close to the winning touchdown??

surf

And one more thing. Usually if someone is gunning for another person's position, they don't let up until that person has blown up. Who is to say if VN's fund didn't close down when it did that the market wouldn't have gone down further just to reach the real breaking point for his fund?

 

[Maverick1]

Quote from marketsurfer:

thanks, atticus, interesting.

is there a way for someone trading VN's size to continually earn those types of returns without the risk of blowup?

what would you suggest??

surf

Jim Simons does even better returns consistently and on 20x the size in his medallion fund....ever given that a thought? I always chuckle at the fact that Simons doesn't hire from wall street or finance types, he only hires people 'who have done good science'. A cursory look at VN's style,if you can call it that, is enough to know that it is NOT 'good science'. I'm sorry, but basing decisions on silly correlations and brothel activity meters will never qualify in my book. If anyone is curious to see what pseudo intellectual crap looks like, check out the website.

 

[atticus]

Quote from marketsurfer:

thanks. im out of my league here, but, would not the no touch seriously dampen the returns due to its cost?? can you explain 82/100 cash cost?

surf

You pay 82 which returns par if the strike is not touched at any time prior to expiration. Imagine Vic buys an $82,000,000/$100,000,000 NT twice a year, successfully. 36% on his 100MM stake with no variation margin nor debit risk.

Hedge your deltas weakly and maintain the possibility of windfall gains below the strike, as the NT is null, but your futures/vanilla option hedge continues to run. The possibilities are endless.

Trade deferred flies on index with payoffs exceeding 5:1. He wasn't forced to go structured product, simply that the risk is defined at zero haircut, as it is with any permutation of a classic fly, vertical or calendar.