Victor Niederhoffer is a famous option seller. According to Wikipedia:
Niederhoffer studied statistics and economics at Harvard
University (B.A. 1964) and the University of Chicago (Ph.D. 1969). He
was a finance professor at the University of California, Berkeley
(1967–1972). In 1965, while still at college, he co-founded with Frank
Cross a company called Niederhoffer, Cross and Zeckhauser, Inc., an
investment bank which sold privately held firms to public companies.
This firm is now called Niederhoffer Henkel, and was run by Lee Henkel
(who died May 30, 2008), the former general counsel to the IRS.
Niederhoffer pioneered a mass marketing approach in investment banking
and did a large volume of small deals at this firm. He also bought many
privately held firms with Dan Grossman, his partner during this period.
As a college professor in the 1960s and 1970s, Niederhoffer wrote
academic articles about market inefficiencies, which led to the
founding in 1980 of a trading firm, NCZ Commodities, Inc. (aka
Niederhoffer Investments, Inc.). The success of this firm attracted the
attention of George Soros. Niederhoffer became a partner of Soros and
managed all of the fixed income and foreign exchange from 1982 to
1990.[15] Soros said in The Alchemy of Finance that Niederhoffer was the
only one of his managers who retired voluntarily from trading for him
while still ahead. Soros held Niederhoffer in such high esteem that he
sent his son to work for him to learn how to trade. Read more
His trading strategy provided high returns for more than 20 years. However, he suffered a huge loss in 1997.
…reward comes with risk, and Niederhoffer embraced risk in ways
that would eventually become costly. He got caught leaning the wrong way
when the Asian financial crisis hit in 1997, all but completely wiping
his fund out. But he slowly rebuilt, and once again amassed another
fortune, only to see this capital pool destroyed by the financial crisis
of 2007-09.
Bloomberg recently interviewed Niederhoffer.
Niederhoffer is a brilliant and fascinating character, a study of
rich contrasts. He is a nationally ranked squash champion, and former
Berkeley professor of finance and statistics. He is an undeniably
talented trader, except for that small issue of occasionally blowing up
and getting wiped out.
I am not sure that he fully accepts responsibility for his
various disasters. His trading record is akin to setting the track
record on the straightaways, only to crash into the wall on the curves.
Still, he teaches an important lesson for any trader. As revealed in his
first book, “The Education of a Speculator,” the risk-embracing style
that created his first fortune comes with some caveats. Read more
Click here to listen to the interview.
Is shorting volatility a dangerous game?
ByMarketNews
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