Friday, May 18, 2012

The Man Who Took on JPMorgan's Whale Trader

Business Insider's Julia La Roche, reports that a key trader who took the opposite side of the trade conducted by JPMorgan's whale, revealed his trade at, of all places, at JPMorgan's headquarters, during a conference .Here's LaRoche with the details:
Everyone has been talking about how legendary derivatives trader Boaz Weinstein, the founder of Saba Capital and former co-head of credit trading at Deutsche Bank, is the man on the other side of the disastrous JPMorgan trade.

I was there on February 3 when Weinstein recommended buying the Investment Grade Series 9 10-Year Index CDS, which is reportedly the same security the JPMorgan desk was short.

Weinstein, who started Saba in 2005, revealed this huge trade idea that would ultimately cream the bank during the Harbor Investment Conference at JPMorgan's Park Avenue offices in New York (how ironic). Here are some more highlights from my notes...
Weinstein asked the audience a question about whether "credit is more volatile than equities?" He said there are much bigger, extreme moves in credit than equities.  He then provided some examples of credit to equity on a historical basis.

He revealed that he bought "protection" on Investment Grade Index IG9 10 Year Index on the day before the conference.   He said it could be bought at below NAV (net asset value) 
His trade idea was to buy IG Series 9 10 Year Index CDS (maturing on 12/20/2017) because they are "very attractive" and already at a 21% discount so investors could have a "head start."  He emphasized that the trade could be bought at a "very good discount."  
He said the topic of credit is "very much misunderstood" adding that there's "much better liquidity in CDS."  He added that IG investors need to use "incredible leverage."
 You can follow Julia on Twitter@JuliaLaRoche


  1. David and Goliath

  2. he sounds like a zerohedge reader.

  3. "incredible leverage"
    what will kill this economy in the end