The men behind 7 of the greatest financial market trades of all time

Imagine having to live like that for elongated periods of time — days, months, even years. And add to that the pressure of having invested not a few hundred dollars, but billions of them. Not so sure you want to give it a go now, are you?

Detailed below are some financial market trades that will make your jaw drop and leave you awestruck. Most of them were carried out by world-renowned traders, but a few were done by people you are unlikely to have heard of. Take a look…

George Soros Making USD 1 billion in a Day by Shorting the Pound

On September 16, 1992, Hungarian-American investor George Soros’s fund sold more than USD 10 billion in pounds after Soros concluded that the rate at which the UK was brought into the European Exchange Rate Mechanism was way too high, given UK’s high inflation and low interest rate.

Following Soros’ bet, the UK government realised that it would have to pay billions from its own coffers if it continued to keep the pound artificially elevated and therefore, decided to exit the European Exchange Rate Mechanism.

As a result, the pound instantly devalued, netting Soros more than a USD 1 billion in a single day. “Our total position by Black Wednesday had to be worth almost USD 10 billion. We planned to sell more than that. In fact, when Norman Lamont (Chancellor of the Exchequer) said just before the devaluation that he would borrow nearly USD 15 billion to defend sterling, we were amused because that was about how much we wanted to sell," Soros said in a media interview later that year.

John Paulson Making USD 3-4 billion by Shorting Subprime Mortgages Before the 2008 Financial Crisis

Just before the financial crisis of 2008 hit, financial institutions were heavily buying subprime mortgage-backed assets, thinking the mortgage market is one that will never collapse. John Paulson, however, sensed that something was amiss and his fund started getting banks to write credit default swaps on these subprime mortgage-backed assets.

The banks, not having foreseen the crisis, thought it was an easy way to make a quick buck and obliged without complaint. All Paulson had to do after that was wait for the crisis to hit and cash in. His fund netted between USD 3 billion and USD 4 billion in the process, thereby putting him on the list of financial market legends.

Kyle Bass Making USD 3-4 billion by Shorting Subprime Mortgages Before the 2008 Financial Crisis

Dallas-based hedge fund manager Kyle Bass was also one of the few investors who foresaw the subprime mortgage crisis and decided to profit from it by buying credit default swaps on assets backed by these mortgages.

When the crisis hit, Bass sold all his swaps and earned between USD 3 billion and USD 4 billion in the process.

David Tepper Making USD 7 billion in a Year by Going Long on Banks Right after the 2008 Financial Crisis

Just after the 2008 financial crisis hit, stocks of banks like Citigroup and Bank of America were trading at very subdued levels. This is when David Tepper, who runs a New Jersey-based hedge fund, decided it was time to get back into bank stocks.

In early 2009, Tepper bought severely depressed bank stocks heavily in the period that followed and by the end of the year, Bank of America had quadrupled and Citigroup had tripled from its post-crash lows. Tepper’s fund made a cool USD 7 billion in the process.

John Arnold Netting 200 percent Return by Betting Against Rival Firm’s Natural Gas Positions

In 2006, American hedge fund Amaranth LLC collapsed after quickly losing as much as USD 6 billion for wrongly betting on natural gas prices rising with the onset of winter. But meteorologists started predicting a milder winter than was earlier expected and as a result, Amaranth’s position started to suffer.

However, even before Amaranth’s coffers were empty, former Enron employee John Arnold, who now worked for Amaranth’s rival Centaurus Energy, began betting against a rise in natural gas prices. By the time Amaranth collapsed, Arnold’s bets had netted his firm a massive 200 percent return.

Andrew Hall Correctly Predicting Oil Rising to USD 100 a barrel 5 Years in Advance

When crude oil was hovering around USD 30 a barrel in 2003, Andrew Hall, a trader for Citigroup’s energy trading division Phibro, bet that it would touch USD 100 a barrel in the next 5 years. He went on to buy huge lots of long-dated oil futures and because his prediction was far-fetched at that time, he got them at give-away prices.

Hall’s hunch played out correctly and Phibro made way more money from the oil’s rise than it would have if all its money were invested in oil ETFs. In fact, the quantum of money made from the investment was so large that it warranted a bonus of USD 100 million for Hall alone. However, Citigroup did not want to pay Hall the entire amount, which led to a controversy and ultimately resulted in Phibro getting sold.

Jesse Livermore Making USD 100 million by Shorting the Market During the 1929 Crash

Jesse Livermore is known for having successfully shorted the American market just before the crash of 1929. Livermore earned a massive USD 100 million at the time, a fortune that is considered sizeable even today.