This is a ridiculous story. Why didn't you complain to the head of the firm, or at least the risk manager? You basically knew what was going on and you kept quiet about it - crazy. You've no right to be angry IMO, since you did nothing to stop it. She is a total moron, but so is the firm for having non-existent position limits and risk controls.
Yeah the risk management there has some major holes. But to all the people telling this guy to quit, I don't think it's good advice. It's not like trading jobs are just being handed out to inexperienced traders, especially one that isn't even done with school! He's got a job where he gets hands on experience, a salary, and gets to learn first hand from profitable traders. How many of you can get that right now or when you first started? $625k is not much of a loss for most decent chicago shops. They're certainly not going to close because of it. And, eurodollars and s&p are completely different. I don't really see that blow-out as something that is really uncommon in the prop futures world. Most great traders I know have blow ups like these every once in a long while, especially in unfamiliar products. And if you're going to say well than they're not good traders, save it. Taking home fat checks every year after year is what counts. The only thing that really surprises me is the lack of real time risk management. Most firms I've worked at would've had a risk manager up your ass long before you hit $625k. Prop futures traders get out of control, it's part of the environment of prop trading, always pushing bigger and bigger size, it's up to risk managers to keep them in check once in a while. It's different from trading your own account.
You should start contacting other trading firms and seeing if you can get a position though. No need to resign immediately. Also, bear in mind that when a place goes bust, which this one probably will with this kind of risk management in place, firstly everyone who worked there gets their reputation tarred with the same brush, even if it's not their fault. Imagine having Enron on your CV? Second, if it's due to breaching risk limits and/or fraud (most double-down gamblers end up committing fraud eventually to hide their losses), you could get into trouble with the regulators and end up either barred from the industry or with an "unhireable" reputation - again, even if it is not your fault. It is definitely *not* a no-risk option to stay at this firm, especially if she is allowed to continue working. So if I were you, I'd start looking around.
I didn't say there's no difference in trading different products. I am saying that trading index futures like the S&P is pretty basic stuff. A lot more basic than the eurodollars spreads you're talking about. She ignored very basic trading rules in trading something that is pretty straight ahead trading. And because of that she got her clock cleaned as would anyone who traded the way she did.
Something tells me this operation is located in Brooklyn NY or West Hollywood/Glendale CA. Or maybe Bumblef**k USA where some slick talking Yankee can charm a bunch of rich good ole boys. Let me explain a few things: 1) Your head "trader" blew someone and probably is blowing someone to have her job. That story is just ridiculous, from the blatant amateur actions to the "hedging". 2) The CFO is clueless and incompetent for the simple fact that he did not know of this within a hour of when the head "trader" was down even $100k. Is anyone even checking on positions or do they prefer to find out via US mail that they blew up a week ago? It's also obvious there is no risk management. Like I asked before, who in the world is backing this venture? Cause I have a bridge to sell. 3) Hedge funds have to define their strategies & risk profiles when they raise money. Even if you make money trading something completely outside your guidelines, it raises red flags and may cause savvy investors to pull out. That being said, what in the world stops your boss or any other "trader" at her level from, I dunno, going out and buying distressed properties? Or buying soybeans? Just how exactly is she getting access & clearance to start playing with S&P out of nowhere with firm capital? I think you need to take a critical look at the operation you work for. And try to bang your boss before you leave.
This sounds just like a story I read in Penthouse except the middle part needs a little editing . Replace a short with a tit popped out and she wouldn't place a stop with her girlfriend came over drunk and ... I watched but didn't get any...Iam so pissed off.
As I received a message asking a question about this technique, this way to trade is simply to turn around your position at the end of each downswing and at the end of each upswing. So for example when a downswing ends or is ending you change your position from short to long. You are then long into the following upswing. You stay in play from Open to EOD. It will be obvious to everyone that you must have a timely methodology to do this accurately.
In a volatile market you'll get whiplashed up and down and end up with no profits, probably losses, and huge commissions. If it was so easy to figure the tops and bottoms of rallies, there would be people here with private jet and huge houses, etc., etc.