The 10 greatest trades ever made

Nazim Khanmoneycontrol.com

Throughout financial history, traders have countless times engaged in a battle of wit, guts and luck, putting their precious money on a trade in the hope they would outsmart the person taking its other end.But a few have done so in a way that etched their names in history not just because it made them staggering amounts of money but also because their trades were breath-taking in their scope, nerve-wracking in their execution and thrilling in their results.With that, we put together a list (in order of when it took place) of the 10 greatest trades ever made.Jesse Livermore’s bet against the market in 1929 One of the most famous traders ever, Livermore made millions of dollars in 1907 after he bet that US stocks would following a liquidity crisis.He then proceeded to lose most of that fortune in the following years but made up for it after he noticed a bubble forming in stocks in 1929.His rationale was that the mania in stocks would give way soon as the amount that people were borrowing to invest in the stock market was larger had became dangerously high.His short bet paid off handsomely and his payoff was about USD 100 million, which would be several billions today, adjusted for inflation.But given his temptation to continually take outsized risks, Livermore went on to lose his entire fortune again and later committed suicide.His experiences are chronicled in the popular book Reminiscences of a Stock Operator.Paul Tudor Jones bet against the market in 1987After the Dow Jones had moved up from 777 to 2700 in a matter of a few years, Paul Tudor Jones, then a 32-year-old hedge fund manager, thought the rally had run enough.Jones believed that the derivatives boom of the 80s had resulted in traders writing instruments without realizing the risks they carried and it had reached a point “that when stocks started to go down it was going to create more selling because the people who had written these derivatives would be forced to sell on every down-tick.”Jones shorted the market that soon went down on what is now known as Black Monday, when the Nasdaq pummeled 22 percent in a single day.The bet resulted in a USD 100 million payoff for Tudor, enough for him to reportedly buy every available copy of a documentary later made on him because apparently he didn’t want his trade secrets revealed or because he didn’t like how he looked in it.Stanley Druckenmiller’s bet on the markIn 1989, while working as a manager with George Soros’ Quantum hedge fund, Stanley Druckenmiller, dubbed as a low-profile alter ego of the billionaire investor, believed the perceived difficulties in the German re-unification had depressed the German mark to extreme levels.Druckenmiller first bet several million dollars that it would rise but later upped it to 2 billlion on Soros’ advice. After Germany unified, the marks rose resulting in a huge payoff for the Quantum fund.George Soros’ 1992 bet against the poundIn 1992, Soros felt that UK government’s reluctance to raise interest rates in the face of high inflation would force it to devalue the pound.Soros sold short more than 10 billion pounds and when his hunch played out as he expected, emerged richer by a billion pounds. The trade led him to be labeled as the “man who broke the Bank of England”.John Templeton’s bet against dotcom stocksThe mutual fund pioneer was known to be a daring risk taker (using borrowed money, he purchased every single NYSE stock trading under $1 during World War II) and, at the height of the dotcom bubble, went on to short every IT stock that would complete six months of listing (after the mandatory lock-in period for company executives would expire).The bet made about USD 80 million for Templeton a few years before he passed away, sealing forever his reputation as an ace contrarian and a legend of the investing world.Jim Chanos bet against EnronAfter an intensive research, Jim Chanos came to the conclusion that Enron’s aggressive accounting practices and a flawed business model would result in the energy giant going bust.Chanos shorted the stock all the way till it collapsed to zero.Andrew Hall's bet on oilIn the early 2000s, legendary commodity trader Andrew Hall was convinced crude oil was poised to enter into a multi-year bull market.When offered an unusual but a highly risky contract that would result in huge payoffs for him only if oil prices were to cross USD 100 a barrel by 2008 (oil was at around USD 25 in 2003), he took it.The rest is history.John Paulson’s bet against US property marketThen a little-known hedge fund manager, John Paulson was convinced that the United States mega property boom between 2003 and 2006 was set to end in tears thanks to a highly-risk subprime lending and the creation of complex derivatives.Paulson bought credit default swaps, an insurance-like product that pays off during times of crises, on a number of financial institutions and in the process made about USD 15 billion for his fund, and several billion for himself.Kyle Bass’ bet against US property marketFollowing the same strategy as Paulson’s, Bass too shorted the US subprime market the same way that resulted in billions of dollars of payoff for him too.David Tepper’s bet on banksAfter the financial crisis unwound, hedge fund star David Tepper bet the US government would do everything to not let marquee banks such as Bank of America and Citi collapse.Consequently, at the depth of the stock market lows in early 2009, he purchased depressed financial stocks that later bounced back, resulting in a personal payoff for him to the tune of USD 4 billion.