How does John Arnold trade? He has had a few years that have probably been the most impressive of any trader ever. His bread and butter seems to be the natural gas markets. I was wondering if anyone knows his strategy. Does he just trade based on fundamentals?
He trades futures, swaps and OTC spreads in NatGas (and electricity in some degree). He also has been investing in valuable natural-gas storage facilities.
He obviously trades thousands of NG spreads, as he sqeezed hunter out of some dough. Spread traders often have fundamental biases in energies, I've found. Although you can chart spreads & trade them technically, which is what I sometimes do. He was recently featured in a Fortune mag...I think we have it in our bathroom! OP you might want to retrieve that article for more insights. GL!
An old article I found that I think is still pretty relevant.- http://blogs.chron.com/newswatchenergy/archives/2007/06/john_arnold_tel.html By September 15, as Amaranth's natural gas positions continued to deteriorate and its cash position weakened considerably, Amaranth began to seek a counterparty to buy its energy book. One of the counterparties Amaranth approached was Centaurus. Late on Saturday, September 16, Amaranth's senior energy trader Brian Hunter asked John Arnold, Centaurus CEO, whether the hedge fund would like to make a bid for some of Amaranth's positions. Early the next morning, Mr. Arnold offered a bid after making the following observations: "I was not in the office on Friday but I understand you were selling h/j [March/April]. The market is now loaded up on recent, bad purchases that they will probably try to be spitting out on Monday if there is a lower opening given that spread has been in free fall. In my opinion, fundamentally, that spread is still a long way from fundamental value." "Over the past couple years the market has put a big risk premium into that spread yet it has paid out on expiry once in ten years. We'll be at all time high storage levels with mediocre s/d [supply and demand] and an el nino. Even though that spread has collapsed over the past 2 weeks, the only reason it's still $1 is because of your position. Historically, that spread would be well below $1 at this point given the scenario." Mr. Arnold gave Mr. Hunter two price quotes for the March/April spread: 45-60 cents for the March/April 2007 spread which had closed the previous trading day at $1.15; and $1.00-$1.20 for the March/April spread in 2008 and beyond, which had closed the previous day at between $2.10 and $2.20. Mr. Hunter declined Mr. Arnold's offer. Mr. Arnold's prediction of the behavior of these spreads, however, turned out to be remarkably accurate. On September 21, the last day of Amaranth's trading in the natural gas market, the March/April 2007 spread stood at 58 cents, and the March/April spreads for 2008 and beyond ranged from $1.18 to $1.25. After several days of frantic negotiations with several brokerages and banks, on September 20th, Amaranth formally sold its energy book to its clearing firm, JPMorgan Chase, and Citadel, another hedge fund. To meet its margin calls and satisfy client requests, Amaranth liquidated the remainder of its $8 billion portfolio.
This is the truth and nothing but he truth. Yes i know none of you will believe me but that is fine with me. A very good friend of mine worked very closely with John Arnold at Enron. He started out as an analyst... 40K a year and decided that he could trade and make the big bucks with his own analysis. He is very good at math and is one of the best natural gas forecasters outhere. He is down to earth and is very nice. He drinks lots of starbucks throughout the day and he did not start his fund with only his own 8 million. He invited a lot of people with money to invest with him and brought a few guys from Enron as well. He had way more than 8 million net capital when he started or soon there after. You see the spike in natural gas at the end of this summer the one that mad eit rally for a week up 40 %.. yes this end of august 2009 and sept. Guess who started it.. John Arnold. Yes he trades spreads. Yes he trades options. Yes he knows more about physical natural gas and forward fundamentals than you or I could ever dream of.. he is an excellent trader with smarts and hubris. He is very impressive. If you read all of this and are still interested then let me take you back to 2002 and let you see a majority of his e-mails. they are open to the public on the web.. thank you ferc! Here is the link... http://www.enronexplorer.com/focus/17348 let me know if you find out his strategy from the e-mails here is a sample e-mail Crude update Email details From: msagel@home.com To: John Arnold , mmaggi@enron.com Sent: 31/01/2002 at 22:17 Email metadata Themes: The message Crude is giving a potential sell scenario for Friday. While the market has been all over the map, I have the possibility of a lower high on the same daily strength pattern. March crude saw a recent high of 2037 on 1/28. A particular daily strength pattern appeared from that day. Tomorrow, Friday, should March trade above 1950, the same daily strength pattern will show up. A down close for the day is a sell signal. I am also getting better hourly strength patterns from Thursday's late action than what was seen at the 2037 high. This sets up a bearish divergence back down and a minimum target back under 1856. I have an hourly sell signal once crude takes out the low of the highest hourly bar. Call if any questions. Mark 410-308-0245 I have all kinds of information liek this that i post on my journal which is here http://www.elitetrader.com/vb/showthread.php?s=&threadid=183174
this e-mail information has been available for over 5 years .. so if you are just now finding it because of me and elite trader then guess what.. this is exactly why most of you lose at trading.. you are about 5 years behind the curve on a last to know basis..not trying to sound mean. Just being honest and truthful i post lots of info like this on my journal here http://www.elitetrader.com/vb/showthread.php?s=&threadid=183174
here is a run down of somep of his positions back in the day I don't know if I gave this to you yet. -----Original Message----- From: "Zerilli, Frank" @ENRON Sent: Friday, November 30, 2001 12:06 PM To: Arnold, John Subject: TRADE RECAP #5 EFS Transaction CAL02 ENRON SELLS62 MAY02SWAPS ENRON SELLS68 JUL02 SWAPS ENRON SELLS167 OCT02 SWAPS ENRON SELLS92 NOV02 SWAPS ENRON SELLS67 DEC02 SWAPS COUNTERPARTY IS CINERGY...USING RAFFERTY TO POST ENRON IS BUYING FUTURES POSTING PRICE IS 11/30/01SETTLEMENT CAL03 ENRON BUYS 57 JAN03 SWAPS ENRON BUYS 2 FEB03 SWAPS ENRON BUYS 7 MAR03SWAPS ENRON BUYS 26 APR03 SWAPS ENRON BUYS 27 MAY03SWAPS ENRON BUYS 71 JUN03 SWAPS ENRON BUYS 93 JUL03 SWAPS ENRON BUYS 93 AUG03 SWAPS ENRON BUYS 46 SEP03 SWAPS ENRON BUYS 27 OCT03 SWAPS ENRON BUYS 26 NOV03 SWAPS ENRON BUYS 27 DEC03 SWAPS COUNTERPARTY IS CINERGY...USING RAFFERTY TO POST ENRON IS SELLING FUTURES POSTING PRICE IS 11/30/01 SETTLEMENT
john lavarro asks Arnold to please tally his sportsbook losses... lol. as if tallying those is difficult! rom: John Arnold To: John Lavorato Sent: 19/11/2001 at 14:53 Email metadata Themes: Sunday November The message 5 -----Original Message----- From: Lavorato, John Sent: Monday, November 19, 2001 8:45 AM To: Arnold, John Subject: RE: 5 day or 7 day for hub cash -----Original Message----- From: Arnold, John Sent: Sunday, November 18, 2001 11:50 AM To: Lavorato, John Subject: RE: will do. The purpose of nymex on weekends is to make everybody in the industry bring up EOL every day. There were a few days when I would get in at 7 and power traders in the industry were already trading gas either throught the broker market or on ice. I'm trying to ensure EOL is the primary system used to trade gas. However, it is a money loser. If we gap down 10 cents over a weekend, I lose an average of 5 cents on 600 lots, $300,000, minus bid/offer on maybe 50 buy/sells of 30 lots times .005 is $75,000. I don't really want to put more automatic products on the system that do little good as far as promoting EOL but are money losers. The one exception is Hub cash which I think should be a 24 hour 5 day a week product. Are the FedEx's getting to everybody Monday or are you sending them Monday? -----Original Message----- From: Lavorato, John Sent: Sun 11/18/2001 10:49 AM To: Arnold, John Cc: Subject: I need to give you a task. Figure out what I lost last week. Also, why don't we have the rest of month henry hub swap up on weekends. this week 150 each indi +5.5 jets +5.5 phili -7 seattle -3.5 tenn +2 sd +9 jack +5.5 -----> 250 st louis -8 st louis/ne england over 46.5
Im sure he is a smart guy and is good at math but there are a lot of people like that out there. His life seems to more be a long string of really lucky circumstances and opportunities that have landed him where he is. I mean, say he happened to be born a few years later. He wouldn't have been hired by Enron straight out of Vanderbilt because they would not have been around and who knows, maybe he would be a consultant or something in Dallas.