Did ET's MarketSurfer make a cameo? He was quite the VN fan and may have worked for him IIRC. What risk management mistakes did Victor Niederhoffer make to blow up a few times? | Page 3 | Elite Trader
"On October 27, 1997, losses resulting from this investment, combined with a 554-point (7.2%) single-day decline in the Dow Jones Industrial Average (the eighth[20] largest point decline to date in index history), forced Niederhoffer Investments to close its doors. In a lawsuit that Niederhoffer later filed in the U.S. District Court for the Northern District of Illinois against the Chicago Mercantile Exchange, where he traded options, he alleged that floor traders colluded to drive the market down that day to force him out of his positions. Traders at the time said Refco may have been responsible for as much as $35 million of Niederhoffer's losses.[21]" https://en.wikipedia.org/wiki/Victor_Niederhoffer -This is why you hedge. If he had hedged instead of doing naked shorts like the majority of the big shot investors, fund managers, traders and etc. who lost and blew up their accounts, his investment funds would've still survived. He might have still lost (very few people can survive a 7.2% drop in the market when betted the wrong way) but he would've still had money left to invest/trade. Shorting options have extremely high probability of winning but when you lose, you lose huge, wiping out all of your gains. That's why the premiums are priced so high. Tail risk, my friend, tail risk. And the guy studied statistics. LOL Guess he fell asleep in class the day when they were talking about outliers. At least he had the money to sue, this guy didn't after he did exactly the same thing 10 years ago: https://www.washingtonpost.com/arch...ped-out/090c57f7-fc75-4f02-9d22-585cf53c8548/