How can this oil hedge fund giant lose so much when October was an easy short trade?

Discussion in 'Commodity Futures' started by learner88, Nov 25, 2018.

  1. I have negligible experience in trading oil. However, I do have some experience at chart-reading. Looking at CL futures, October 2018 was an easy short trade. Those who shorted will enjoy the ride with little whipsaw. It was an easy trade.

    I am surprised that great oil traders, such as this hedge fund manager Pierre Andurand, can lose so much in an easy trading month. I am not gloating at his losses as I'm sure he is savvier and smarter than me. He is the rich one, not me. What puzzles me is how can the best traders lose so much in a month which looks like an easy month to me? I don't think I'm alone. Any one of you can open up CL chart and can see that the short trade was an obvious and easy one to ride. CL is liquid and it should not be difficult to close position when a trader makes a mistake. It's not like the 2915 CHF debacle which gapped up in a single day. Hard to imagine that an experienced trader can lose 20% in a single month.

    What did I miss? What mistakes could this top-notch oil trader make to lose so much in a good month?

    Pierre Andurand, who runs one of the last big oil-focused hedge funds, took significant losses in October as petroleum prices cratered.

    Pierre Andurand, who earlier in 2018 predicted oil could soon hit $100 a barrel, suffered the largest-ever monthly loss of his flagship fund in October. The $1 billion Andurand Commodities Fund lost 20.9% last month, taking the fund down more than 12% for the year, according to numbers sent to investors and reviewed by The Wall Street Journal.
    murray t turtle, dealmaker and toc like this.
  2. I doubt many hedge fund guys are very good at technical trading.

    They mostly trade a "theme". His apparently was, "oil market going higher".

    IOW... he had the "wrong bias".

    Such is not an uncommon occurrence.
  3. Even if they are bad at technical trading, they should have stop losses in case their theme did not play out. With stop losses in place, it is hard to imagine how a fund can suffer >20% losses in a single month.
  4. I doubt they have good stop discipline, either. He obviously didn't.

    Just like the NatGas fund a few years back.
  5. Maybe this oil fund manager's position in oil trade was too huge to get out. I find it hard to believe something as basic as stops which a retail person like me can appreciate can go unappreciated by someone as advanced as this hedge fund manager. He is definitely richer and more successful than a retail guy like me.
  6. There is a potential problem with playing "too much size" for a market. Then again, he could have hedged his position in the oil futures market. He could have done a few things other than "just hold" or "average down".

    That said, it's easy to screw up in trading also.
    murray t turtle likes this.
  7. toc


    Thx for the thread. Being a technical guy myself, I would like to know what is your technical argument for a short trade on oil. I am look at the chart of USOIL and CL futures which are nearly the same.
    Last edited: Nov 25, 2018
  8. Nothing special. You can see with a visual check that the trend has reversed in Oct.
  9. Palindrome


    I honestly think these well known hedge fund guys, have already made it pretty big. They get lazy at the stage in which we hear of their profiles and then watch their blunders.

    Also size is a huge issue.

    I agree, the last couple weeks the only way you play crude is from the short side, with the very very occasional trend reversal attempt.
  10. toc


    One argument for TA is "a picture is worth a thousand words". Agreed completely.

    But when running a billion dollar HF and taking a $100M or near position for even few weeks or months, then arguments in favor need to be atleast "a dozen", even when limiting oneself to TA "only".
    #10     Nov 25, 2018
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