ouch!!! Feel for the clients in this one. As a learning trader, I feel there is lots to learn from this experience. Q... why couldn't the hedge fund hedge the position? I understand they were naked premium sellers. Couldn't they convert their naked put to short strangle? Or close the position, or buy calls... I don't follow the crude or NG market but it looked like while the move was strong, it wasn't an instantaneous or one day affair. Similarly, would going in as an iron condor or a similar multi-leg strategy have helped their position? Or were the spreads too wide for that strategy to make sense after the market started to move? thank you for your feedback!
Oh man. That looked like a guy saying farewell before going to the electric chair. I’m assuming the Natty gas short squeeze got them? Anyone know how much AUM he had?
It seems he was caught by a rogue wave more than once.... Business News $200 million futures scandal snares 2 Tampa brokerages By Michael Sasso | Tribune Staff Published: July 10, 2012 Updated: March 18, 2013 at 08:17 PM TAMPA - A scandal at a Chicago commodities trading company could put at risk investor dollars overseen by at least two Tampa investment companies. This week, regulators froze the assets of a Chicago company called Peregrine Financial Group. Among its duties, Peregrine processed, or "cleared," the trades of brokers across the country who trade in oil futures and other commodity futures. The industry's regulatory group, the National Futures Association, alleges that Peregrine misappropriated millions of customer dollars that it was holding. For example, the company reported that it had $225 million of customer money deposited in a bank, but the NFA discovered it had only $5 million on deposit there. Peregrine's founder, Russell Wasendorf Sr., unsuccessfully attempted suicide amid the controversy. The NFA ordered Peregrine to freeze its accounts, and a federal regulatory agency, the Commodity Futures Trading Commission, has filed a federal lawsuit against the company asking a judge to appoint a receiver over it and freeze its assets. The mystery over the missing $200 million likely will affect brokerages nationwide in the obscure business of commodities futures and options. Locally, at least two Tampa companies used Peregrine to process trades, Transworld Futures and Liberty Trading Group. There was no evidence Tuesday that either Tampa company committed any wrongdoing. It also was unclear how much financial exposure either company has to the Chicago scandal. Liberty Trading is controlled by James Cordier, who regularly speaks about commodities investing on national business news shows. He did not return calls from the Tribune on Tuesday. A Fort Lauderdale-based securities lawyer, Darren Blum, said a client from Texas fears he may have lost at least $700,000 that he invested with Liberty Trading because of the Peregrine scandal. Robert Rutger, an executive at Transworld Futures, said nearly all of his clients' money is tied up with Peregrine. He was trying to assess the damage Tuesday. "It's kind of a difficult situation to even comment on," he said. msasso@tampatrib.com (813) 259-7865 Twitter: @msasso
Sweet Bobby, Thanks for this post. I have not been on Elite lately. And popped in today to see what maybe of value. Your post was on the top of the list and proved to be a real gem. I am an option seller and manage money for clients as well. Not sure why Mr. Cordier experienced the "catastrophic loss" but usually this is caused by lack of proper reserves and allocation strategies. Mr.Cordier is a highly respected author and money manager so this makes it all the more interesting and perhaps frightening -- particularly to traders without much experience in hedging futures and options trades. I attempted to research what "caused" the closure of Mr. Cordier's Hedge Fund. But could not find any current information. His website is basically closed, with just a splash screen providing contact info. Google searches were not of any real help either. Perhaps someone on this thread may know more but I can only speculate what really happened.
Never understood risking huge sums to make a little. Risk vs reward, reward must be multiples larger and risk smaller. My guess is no risk management on top of that! If you keep gambling, the house eventually, wins!