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Comment by qwrusz | Hacker News Reader

> The 6 years he spent learning at another trading firm or the fact that on his own he probably had alot less risk oversight that allowed him to lever up more than he would have in side of an investment house.

Maybe neither? As good as this kid might be, hard to believe he did a 30x year! Even with more risk and there was some crazy volaility back then, a 30x year going from half a million pounds to 15 million in 12 months is very high.

Never know of course. He might have done it. theoretically possible with the exotics CDS in that year. But also hard to trust journalists aren't just twisting facts these days.

Another explanation for the rise: He already had several million while working at the firm, but they weren't in his name, not in a public filing anyway until went out on his own and took out the funds.

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A 30x return is easy - rare, but easy. Repeating it, however, is damn near impossible.

Options trading, which he was good at, went haywire on that day. Anybody in a decent position with options made crazy returns. But their timing had to be good. If you bought a short-dated, just out of the money SPY put the day before, and sold it that afternoon, you made a killing as far as percentage return.

The number of people who had that or similar trade probably numbers in the thousands. But the reason you don't hear about them is it was either to hedge a larger position, or a small speculative position, and making $50,000 doesn't make headlines.

Firstly: this is just overall a ridiculously incorrect comment.

Second: the 30x return discussed was back in 2008-2009. The flash crash you are talking about happened in 2010. Also the SPY moved down like -10% during the crash. Bro, come on.

I just want to jump in and comment that 30x gains in a year are not really that crazy with out of the money close to expiration options. I've had 2 different years in the past with better than 30x gains (and years where my options account went to 0).

If you had bought out of the money puts with a near term expiration for an index like SPY and it dropped 10%, you could be talking 80-1000 times return depending on how far out of the money and how close to expiration.

Disclaimer: I do not recommend out of the money options trading for anything other than pure gambling on money you couldn't care less about losing.

Ok Hacker News, I think I am done for the day after this.

Just to be clear, we are talking about a 30x return in someone's entire net worth, in 12 months, from trading.

I didn't say you couldn't construct a perfect hypothetical trade that in hindsight would have earned someone a huge 30x or 100x return or whatever. Not sure how that's even relevant though (unless maybe you trade from home and buy those expensive mega-ultimate-dragon options trading online skype courses and still think such trades are even worth talking about).

I didn't even say a 30x return of his net worth was impossible, I said it's "hard to believe" and "very high'.

But apparently a 30x return "is easy" and this guy has done it twice...

OK. Well it's been fun. HAGW everyone

P.S. I appreciate chrisatumd's disclaimer, nice to see, and a good reminder that investing and trading is gambling and you can lose it all, whether you're an amateur or pro.

Man, I lost it at "A 30x return is easy - rare, but easy."

Re: story, I've casually followed his story. I'm also very dubious of the allegations against him and claims about his performance.

I agree with your second point. As to my wording on your first point, I should explain a bit more....

"Easy" means that it's not technically hard to do. For instance, anyone who's lucky enough can win 30 times their money in roulette. It's "easy", but rare - only 2-3% of people do it.

For contrast, "hard" to me would be something like trading gamma-delta option spreads.

Technically, just about any investor do the former (although they'd have to be lucky), while few can do the latter.

Final point - I consider being lucky consistently is damn near impossible (although statistically, I guess it happens to a few of the 8 billion people out there).

Not trying to upset you, just trying to help you see that the story is not crazy. I'm not sure if you've tried trading futures or options before.

I've never traded futures, but I've seen with the amount of leverage that options provide makes the story quite believable (easy was probably not what the prior commenter meant).

I didn't even say a 30x return of his net worth was impossible, I said it's "hard to believe" and "very high'.

It's simple if you have the talent.

E.g. here's a person who deposited $1000 in cash into a trading account and wound up with $100,000 after just 10 months of trading. That's a 100x return.[1]

Think of how rich that person could have been had she decided to continue her trading!

[1] https://en.wikipedia.org/wiki/Hillary_Clinton_cattle_futures...

It's possible, but almost inevitably, the "strategy" employed backfires, and the trader loses everything. One that comes to mind is Brian Hunter[1], formerly of the now defunct Amaranth Advisors hedge fund. Hunter was viewed as a sort of wunderkind, but he had a natural gas position (I've heard the initial position was between $1B and $2B, but I don't know specifics) go south, and rather than sell off and accept the losses, he doubled down and sank the firm. Margin calls ensued (of up to $6B) that could not be met and assets ended up being sold off for pennies on the dollar. (I previously worked for a firm that bought a large chunk of Amaranth's assets).

[1] https://en.wikipedia.org/wiki/Brian_Hunter_(trader)

Ya man I been in the industry a long time I remember Brian Hunter from even before Amaranth. Always interesting reading when his name pops up. Clearly, a brilliant trader on a different level than most guys, but ya that's not always enough on it's own. He should have gotten that DB bonus though, that story was fucked up.

Were you buying these options throughout they year, or just near earnings?

Here's an option on DB (DeutscheBank) that moved 10x THIS MORNING.

http://finance.yahoo.com/quote/DB170217P00017000?p=DB170217P...

Here's a PUT option on WMT (Walmart) that moved 35x also this morning:

http://finance.yahoo.com/quote/WMT170217P00062500?p=WMT17021...

Here's an option on CL (Colgate Palmolive) that moved 8 this morning as well.

http://finance.yahoo.com/quote/CL170217C00077500?p=CL170217C...

SOMEBODY made money today on these, and the market hasn't been open for an hour yet.

Before calling my comment "ridiculously incorrect", I would appreciate it if you would show a better understanding of capital markets.

I agree with this. I made a 32x return on a front-month WAY out of the money options trade in March of 2008. I tried to pull it off again and lost all of it. Good tuition money.

I always wonder why to invest it all... at the very least, if I gained 10x or 32x, I'd save away the original amount or a small fraction of the total, and NOT gamble with that.

>I always wonder why to invest it all

Greed and ego.

You can't win with investing. If you lose money, you say "I shouldna' done that." If you make money, you say "I shoulda invested more."

There is substantial research that suggests taking a moderate asset allocation combined with annual rebalancing will have a fairly predictable return over the long run (a decade or more).

If you're making trades frequently, you're probably (as shown by research) throwing that money away.

There are always things that go up, and others that go down, but a well constructed portfolio will do more of the former and less of the latter. Annual rebalancing then buys the cheaper asset (by definition, on a relative basis, the cheaper asset is bought and the expensive asset sold when rebalancing).

And yes, it is actually that simple. The problem is (as someone else on this thread had posted): fear and greed. If you can ignore that, you can do well.

I thought that any trades made during the crash were reversed after.

If he did 30x a year, he must have been the best investor in the world?

No, it just means an insane beta and good luck. Anyone can set up the lottery to create an insane beta. And luck, well, you know how that goes.

you can't judge skill from outcomes in the short run if a large component of the outcome is outside of the control of the operator

see e.g. Taleb "fooled by randomness"

there's also a good "winner's game" vs "loser's game" argument, see Ellis - The Loser's Game: http://www.cfapubs.org/doi/pdf/10.2469/faj.v51.n1.1865 (PDF)

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