Imagine Vic had replicated in purchasing a touch to defend his 1000P. The April 1300 Touch is priced at 72/1000. $7MM pays 100MM if 1300 is hit. A fraction of the credit received from selling the Mar vanilla puts.
Not sure if this was already posted on this thread, but an article in the current New Yorker lays out most of the facts. http://www.newyorker.com/reporting/2007/10/15/071015fa_fact_cassidy
on page c2 of the wsj is a small article on what recently happened. it remarks that on august 26 vic was saying everything was fine with the fund. but in reality there was a loss of 70% and then octane pulled significant funds out. matador was then liquidated. you have heard all this before. so most likely, he was painting the rosy picture to all who had a front row and some of those people believed him.
Pulling a Neiderhoffer, new term: Big-time gamble where you go ALL-IN when trend is moving against the Directional Trade, with vague denial/obfuscation after the Blow-Up.
I think you can call the first part the Niederhoffer gambit. Its not as powerfull as the 'Leeson Gambit' which entails actually trying to move the market back in your favour. Its not a coincidence that both Leeson and Niederhoffer are noted for seeing the market as just a big casino.
The bottom-line is that Vic is an extraodinarly talented guy (athletics + intellect) who developed a method for modeling the markets that he (still feels) is bullet proof. If he could go back and do anything different he wouldn't, which is evidenced by the second major (public) blowup in about 10 years to the date of his first one. Not for nothing, he elevated himself far beyond his middle class upbringing and developed a process for modeling/trading which was cutting edge for its time. It's rather frustrating that he choose not to manage his risk appropriately, resulting in his inability to continue to play the game, because, quite simply he was out of bullets. Hey, I a'int mad at'em, he's still the man. With all those baby mama's, his wealth, the art collection the published body of work and his fascinating theories on volatility and the importance of entering positions against the current trend, I think he's brought a lot to the trading community. Hopefully he'll have one more shot to at least establish his reputation of who he thinks he is, if only for himself. Good trading, JJ
Come on Surf.....Close to the winning touchdown? If the market kept plummeting and didnt bounce you would have been saying thank god VN threw in the towel/great move by VN. The guy is short 15000 puts ..the down falls 1500 from the high....and you call that close to the winning touchdown. Close to the winning TD would have been selling those puts when the dow hit 12,600. His strategy worked good in a bull/sideways mkt.....he loads up margining out the wazoo...hoping that the mkt doesnt get cracked. Market has a vicious downturn and he gets wiped-out. Far from a brilliant strategy. The sad part is this wipe-out happened almost in the same fashion as the last. Ya think the guy woulda learned something last time.
RA: Since VIX didn't go from 10 to 37 in a day, he should have plenty of time to adjust the risk even though it would mean a loss in the account. So it doesn't make sense to believe it blew up because of a change of vol.