Victor Niederhoffer,
Wasnt he the guy who blew his fund up..
Famed speculator Victor Niederhoffer played the same games everyone else did -- but he always played bigger. As a student of trading, he worked under George Soros; he regularly challenges grandmasters in chess and checkers; he's won repeated titles as a national squash champion. As an international futures trader, he regularly wagered hundreds of millions of dollars on margin. And on Monday, Oct. 27, 1997, he lost.
Big time.
Niederhoffer's three hedge funds, Limited Partners of Niederhoffer Intermarket Fund L.P., Limited Partners of Niederhoffer Friends Partnership L.P. and Niederhoffer Global Systems S.A., were wiped out Monday as losses estimated at $50 million to $100 million claimed the first high-profile victim of the market swoon.
TheStreet.com has obtained a letter addressed to Niederhoffer clients in which he writes: "Right now the indications are that the entire equity positions in the funds has been wiped out." Acknowledging his propensity for risk, the memo added that "this time we did not succeed, and I regret to say that all of us have suffered some very large losses."
According to the letter, Niederhoffer's losses came as a result of speculative bets on S&P 500 puts, and he was among several big traders to get tagged with huge losses, according to a source on a Chicago trading floor. Curiously, a standard bet on puts Monday would have proved prescient. Possibly, one trader said, Niederhoffer had started going long by writing puts during last week's weakness. That would have become a dangerous and costly trade on Monday as markets screamed lower. Another trader thought Niederhoffer had made bets based on volatility that had gone terribly awry. Niederhoffer's funds have been working with its brokers since Monday evening to meet obligations, according to the memo.
