Victor Niederhoffer--- Rare Silver Auction Catalog

[taowave]

Quote from Icarus5:

Honestly?

He had 12 years of truly outstanding performance in which he led the pack in terms of hedge fund performance.

I think he got overconfident, and this led to his fall (yes, there is irony in someone with my alias definding him ) ... and once he crossed that threshold, he couldn't go back to his previous iron man performance level.

That doesn't make him a fool, it makes him human.

I

Since 95 there were apx 8 corrections of 10% or more and 25 corrections >5%.Its a fact that Vic has blown up twice,which isnt too shabby for a massive premium seller.I would assume that Vic took some time off after his first blow up,which could lower the number of corrections he has had to stomach as his gamma explode on him...Lets make believe he was "retired" during 25% of those corrections

It may be closer to the truth that there is a 1 out of 3 chance Vic blows up in corrections > 10%,and an apx 2/18 chance vic blows up in correction of 5% or more.Now,that is Vic blowing up.Had we not been in a secular Bull market,thiis converstation would be much different...

I would appreciate it if anyone could post Vics short option position that led to his demise.According to Pabst,Vic was short 15,000 future options which have a multiplie of 250.Pabst indicated they were the 1000 strike,which ,with the S&P trading at 1400 would mean Vic was short the 71% of spot put.Clearly,they had to be a longer dated option,contrary to what I had originally thought.Does anyone know(Pabst) what expiration they were and if he was really short puts with close to 4 billion in notional value?

At that point we can debate the fool vs human theory

 

[atticus]

15,000 Aug08 1000 puts.

 

[taowave]

Quote from atticus:

15,000 Aug08 1000 puts.

Cant be the Aug 08 as there are none,assuming they are future options.Read where they may have been the Dec of 08..Anyone know??

 

[marketsurfer]

imagine if vns positions are really as transparent in that everyone like blueribbon and atticus know them so intimately. seriously this is just speculative hearsay at best otherwise no wonder vn had issues if EVERYONE knew his every move.


surf

ps. looks like there is some activity on the auction

 

[austinp]

<i>"I think he got overconfident, and this led to his fall"...

*

Quote from atticus:

15,000 Aug08 1000 puts.
--------------------------------------------------------------------------------

Cant be the Aug 08 as there are none,assuming they are future options.Read where they may have been the Dec of 08..Anyone know??"</i>

Aug, Dec.... spot or futures options... the details are irrelevant.

Placing a huge bullish bet with 1+ year's extrinsic value exposure, VIX levels near two-decade lows?

Overconfident is not apt. Conceitedly dumb, arrogantly stupid is more descriptive. That specific strategy = approach has a 100% chance for complete bust in time. It has a 0% overall survival rate, over the course of time.

Volatility is mean reversal. It is not linear forever. Shorting volatility = gamma at multi-decade lows is foolish, at best.

**

Arrogance = confidence would lull one into thinking they can time the turns, bail & cover before an inevitable storm hits. But, once the position begins to take heat, the exact-same arrogance = confidence does not allow one to admit a grave error, cover for big loss and begin anew from three steps back in time.

VN did nothing, absolutely nothing spectacular that anyone else couldn't have equaled or bested. Heck, MBAGearhead, one of ET's very own made a similar run chronicled in the P&L 2007 thread via ES this year playing the "average-down" game.

Everyone wondered how he could print money, sometimes eye-popping returns time after time with no losses. For awhile, he absolutely destroyed the markets and out-performed everyone else.

Sound familiar, in a parallel sense?

Along the way he posted many times (recorded for posterity) that he hoped the unspoken tactic would keep working indefinitely. Even during the huge returns posted in that thread, he questioned the robustness of his approach. Why? Because intraday he was riding out degrees of heat that were unsustainable over time.

I would imagine VN inwardly knew the same thing, all along. The ride is great, while it lasts. Eventually there will be a valley of death ahead. Pretending to oneself otherwise is, well, lying to oneself.

VN never did anything special or remarkable, really. Any one of us can become proficient enough to sell volatility / gamma in that we can outperform any market for some finite period of time. Gotta be good at musical chairs. Eventually the music changes tune, dramatically.

Eventually, the music always stops

 

[atticus]

Quote from taowave:

Cant be the Aug 08 as there are none,assuming they are future options.Read where they may have been the Dec of 08..Anyone know??

Yeah, it would've been Sep that far-out. I personally heard Mar08 and Dec08 from a Vic-investor [my brother], but it's blogged [erroneuously] here:

http://www.tradersnarrative.com/rumor-vic-niederhoffer-blows-up-again-1346.html

My post regarding the strike/tenor: http://www.elitetrader.com/vb/showthread.php?s=&postid=1633076&highlight=1000+puts#post1633076

 

[Pekelo]

Quote from Icarus5:

(yes, there is irony in someone with my alias definding him )

So why don't you use the earlier handle, Jimmy Jam?

Although I understand, you had like 4 with JJ, so a change is nice....

 

[taowave]

Quote from austinp:

Cant be the Aug 08 as there are none,assuming they are future options.Read where they may have been the Dec of 08..Anyone know??"</i>

Aug, Dec.... spot or futures options... the details are irrelevant.

Placing a huge bullish bet with 1+ year's extrinsic value exposure, VIX levels near two-decade lows?

VN did nothing, absolutely nothing spectacular that anyone else couldn't have equaled or bested. Heck, MBAGearhead, one of ET's very own made a similar run chronicled in the P&L 2007 thread via ES this year playing the "average-down" game.

Everyone wondered how he could print money, sometimes eye-popping returns time after time with no losses. For awhile, he absolutely destroyed the markets and out-performed everyone else.


Along the way he posted many times (recorded for posterity) that he hoped the unspoken tactic would keep working indefinitely. Even during the huge returns posted in that thread, he questioned the robustness of his approach. Why? Because intraday he was riding out degrees of heat that were unsustainable over time.

VN never did anything special or remarkable, really. Any one of us can become proficient enough to sell volatility / gamma in that we can outperform any market for some finite period of time. Gotta be good at musical chairs. Eventually the music changes tune, dramatically.

Eventually, the music always stops [/B]

Well said Austin.I was only questioning cash/futures option to gauge the size of his hubris/folly.A multiplier of 250 for futures options as opposed to 100 for the cash is significant as far as that goes.

I for one would not consider backing up the truck and selling 1 year plus,apx 65% of spot options for 60 bps a bullish bet.It is the height of fiscal irresponsibility,a total disregard for risk and nothing more than a death wish...

 

[marketsurfer]

when are positions disclosed to hedge fund investors??

then we have guys like austinp--who is a great guy--- but really has no understanding of operating with VN size, etc, yet feels compelled to comment...

seriously, this is getting more and more bizzare.....


surf

 

[Pekelo]

Ponderables:

1. Why employ talent, if you don't use them?

2. Where was Steve Wisdom, whose job according to an earlier interview was to play the safety valve and prevent Vic blowing out again?

3. Why are we refering to 2 blowouts when it is at least 3 (including 9/11) with a scare in 2006 May, when Matador lost 100 million?

4. Is a 30% DD really salubrious? "Niederhoffer, 62, told Trader monthly, via email: "The loss we had in May (2006) still left us almost unchanged on the year, and given our record, it was quit salubrious."
In June the market went even lower and Matador ended the year about breakeven...

5. By mid-July this year the SPX was up 10%. Statistically speaking, what is more likely, to go another 5% or have a decent pullback? (I am NOT a statsistican)

Article about last May's slide:

http://www.andongkim.com/articles/2006/08/niederhoffer_fundmay.htm