No, it's not far fetched. It's bad risk management. Sorry, no. Victims are unwilling participants in their ordeal. He knew better (or should have, or should have been paying some one who did) and did it anyway. There's nothing admirable about his returns in light of this (entirely foreseeable) loss.
yep, poor risk mgmt is poor risk mgmt. He definitely had the resources to develop exceptional risk mgmt systems. It looks like he tried to corner the market by taking such a large position. That's an old story and has left many broken/blown up. Liquidity dried up because the other ppl on the trade knew exactly who was holding it. For all the money he made, likely the other side wanted their share in return. There wasn't an extreme event that caused the markets to crater. it was a slow parabolic move. He had many opportunities to exit but chose not to. chalk one up to human fallacy (ego/fear of loss, etc...) It's unfortunate and hopefully, not too many ppl are hurt by his actions.
He was short Norway electricity, and long German electricity. Heavy rain in Norway drove down power cost vis-a-vis hydro power. This was entirely foreseeable because unprecedented effects from extreme weather are ordinary--though the average person will equate "unprecedented" with (approx.) impossible. But demographics and inflation alone are enough to necessitate unprecedented effects being ordinary occurrences. Overlay that with climate change making unprecedented weather an ordinary occurrence, and it's flat out negligent to fail to consider that you will be subject to unprecedented effects of weather if you hold a weather-exposed portfolio for very long. The only thing necessary to tie the above logic into the trader being bad is that he understood seasonal exposure of electricity. I'm going to go out on a limb and say someone who can spin an account up that high temporarily, understood the seasonality. Basic diversification and risk management, and he'd probably have gone from $30k to $3 million, rather than $30k to -$100 million...and we'd call him "rich" and "successful"--those few who heard of him. Don't finish the story...you won't like the ending. It's a neat story, the same way Scarface or Blow are...
Yep. What he said. Me ... I just read the chart. Risk mgmt means you don't lose it all (or most of it) on one trade. Which appears to be the case. One of the toughest thing to do as a trader is to pull out of a bad trade. But that is what sets the top traders apart. To manage the risk and make the tough decisions. Anyone can make money when things are riding strong. It's making money and managing risk that makes a great trader in my opinion.
And possibly predatory trading from the other few institutions involved, just like in the final days of LTCM. That's one of the risk of trading in a market with few participants. Once you are in trouble and the other participants know about it( which may be your counterparties if it trades like OTC ), you are almost done. I hate this piece of news, because this guy looked like a genius independent trader. His demise looks like Niederhoffer's, but Aas wasn't simply selling options with OPM, getting performance fees for years before the next blow-up. He was trading his own money and stayed away from the light. If he hadn't lived in a high tax country( I believe ) like Norway, he would probably be still worth a huge fortune. That's when the reality of high tax hits you the most, when you have a terrible year, you are close to bankruptcy and you realize how much you have "contributed" in the preceding years...Ouch.
Ummm...Norway's cap gains tax is 25%. If you're 1256 top bracket in the US, I believe you pay 27%-ish with the 60/40. Also, I don't believe Norway double-dips like states do on top of the fed rate here. Tell me again how it's high taxes (and not mismanagement) that sapped his fortune? Makes a good story, but it's a bit light on facts.