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nwinski wrote:
> Walt,
> I appreciate you remarks about stops but I am not sure that they are
> that relevant in this case. If VN was looking to sell the volatility or
> even a price area via selling premium, then I think it is difficult to
> defend one's capital only depending on stops.
Norman,
Yep, in this case stops wouldn't have done the trick. VN was
over-exposed, period.
I've been pieceing together some of the accounts of what happened in
order to figure out if there was some way he could have hedged the
risk.
VN's getting caught flat-footed here kind of suprised me. In his
book, I noted that, while he traded without stops, he always seemed
to dynamically hedge his positions elsewhere.
Doesn't seem that he did this time. This lends weight to your theory
that he was trading in a desperate frame of mind, trying to recoup
losses in one fell swoop.
I couldn't help getting the feeling when reading his book, that he
felt his best years were past; that he was an old wolf who expected
to miss the "bull's neck" soon, and in accordance with the law of the
pack, be drug down and consumed by his fellow wolves. Not exactly a
healthy frame of mind for a multi-million dollar fund manager. :)
In many ways, it is a scary business, when you realize that your
entire worth as a trader is often judged on the LAST trade you
make.
May the Cosmos save us all from such a fate.
Walt
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