He made a shit load of money probably shorting leveraged vol in a bull market and ketp leveraigng up each step along the way. Basically a martingale on profits until the losing trade comes in and wipes you out. Hard to feel so sorry for people who gain and lose money this way.
XIV trader: ‘I’ve lost $4 million, 3 years of work and other people’s money’
- Thread starter cole_
- Start date
I think the more important number for me to see is how much money he injected into the stock market, ever. Not how much he lost from the peak or from the day prior. That means nothing. Everybody knows gains aren't real until you close a position. In fact, the earnings arn't yours till you're retired and no longer in the game risking anything mark-to-market. Just ask Jesse Livermore - made, loss, made, loss. Earnings arn't yours until you're out.
In the case of this trader, if his story is true, then his total injected according to him is $1.5M from investors + an insignificant portion from himself. So his real loss is $1.5M and change, minus what he still has left. Ignoring real inflation, risk free rate, etc.
So yeah, if someone injected say $500K total over his lifetime into the stock market, and through those astronomical gains of a stock in years prior turned that into $2M portfolio before dropping to zero, that's more like a $500K loss to the market than $2M loss.
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beefcaketrade is why ET is priceless.
I understand that point that he did not lose $ 4 million if most of that was accumulated profits from a stupid martingale like trade but he lost all HIS money and the money of others, whatever amount that was, when he had enough money to take most out and simply go in small again to build it up. For him and those that trusted him like he was a genius after a few lucky leveraged trades it is pretty serious but I still cannot feel sorry (except that he should not do anything drastic) for t his kind of lack of respect for the market or money. He is still wiped out and I am sure he is not looking for semantics to feel better in my humble opinion.
I bet he would give anything to go back and get out with only a $1 million profit. People never learn...
Plenty of ways this could have been played intelligently even with the drawdown.
P.S. Look closely at this P/L snapshot from ToS. His loss on the products was not the full $4 million. He was already $1.6 million in the hole before the XIV losses are counted. So he was already taking serious heat and decided to ride it out and pray (that always works right?)
Agreed. My point is that paper gains are not real until they turn to realized gain by closing a position. And in fact, a trader doesn't really own their gains accumulated from the market until they are out of the game. If you continue to risk money, you continue to have potential to lose it.
Agreed. People confuse luck with skill. And when you're making money you look like a genius. The thing is, people will have no issue about making all that money in the days prior. Probably felt like a hot shot and that they were really smart. So, when they later lose it all, do you need to feel sorry for them? Well, yes and no to a degree. But I bet many of them felt like real hot shots the day prior to the plunge, and felt like a fool after. It's natural selection.
He should have traded these products like he had a smaller account, by the time he essentially more than doubled his money. From 1.5M -> 4M, he should have taken profits and started over and traded as if he still had only 1.5M to play, trying to get to 4M again. But he got greedy utilizing maximum buying power/leverage hoping for compounding those gains. Then he got bit.