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UBS and THE Big Trade?
By thetrader.se
In order to “loose” 2 bln USD, you need to take quite big positions. While UBS is not saying anything, the “bet” must be in a fairly liquid product, and if not “hidden” below the desk, it is almost impossible to loose it on Equities Trading.
Maybe the trade was an extremely big Vega position on the CHF/EUR. A long Vega position seemed like a rather intelligent trade only some days ago, before the SNB announced to “peg” the CHF.
By doing that, volatility on CHF collapsed to virtually zero. Suddenly a winning smart trade, turned out to a nightmare, when CHF all of a sudden became “pegged”. There are very few, if any, Risk Matrixes capturing this kind of scenario, because it does not happen. This is an event outside any Risk Managers stress test. This is a Black Swan event for the holder of Volatility, and the biggest ironi, such a trade would have been perfectly positioned for the turmoil in the Financial Markets. A Black Swan is not always a Black Swan.
Below 30 day chart of the CHF/EUR. Note the totally vanished vol in the pair. If this was the trade or not is to be seen, but this is a possible senario, given the liquidity in the currency market.
The Alleged Rogue Trader’s Facebook Update on the 6th of Sep;
Mr Adoboli’s last update to his Facebook page, dated September 6, simply reads “Need a miracle”.
….it just might be the above trade that caused the loss, as SNB “pegged” the CHF on the 6th of Sep…
For a summary of this subject in today's press click here. Maybe the Swiss got screwed by the Swiss?
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Are you sure about the collapsing vola? I am waiting for vola to come down in EUR/CHF options, and it is just not happening. Also FXF (Swiss Franc Currency Shares ETF) option vola remaining stubbornly high.
Yes, to lose 2bn you need to turn a much, much bigger wheel. For this to fly under the radar of the bank's risk control - you can only scratch your head. According to what we heard about the guy he was "analyst" in "trade support" - isn't that euphemism for "back office"?
Why was he arested though?
Is it illegal to do that type of trade or did he get arrested just because they needed to arrest someone?
Nevermind, the news says the "Trader" made an "Unauthorized Trade" whatever that means.... probably just wanted to take his girlfriend on an African safari and thought this was sure deal.
If the trade went the other way and made 2 billion $ for the bank, the trader would be a hero and get a big bonus.
That's what is wrong with the system. He should be fired either way for putting so much at risk.
Must be just like Long Term Credit 1987 Long Swiss, euro vs everyhthing. forwards, spot. options, derivatives, deltas, ...lol.
Cant be! all the sfr is long vs the dollar and vs the Euro
trillions long, long long.....its the trade, even option deltas massively long swiss uber alles.
long long long, swiss, in the trillion dollar Euro Swiss forward market.
long long long swiss borrowed vs swiss stocks vs short euros...
Burp burp, just long long term credit bank, what can go wrong.?
$ 2 billion loss to show to start, and unwind the long swiss/short
euros at 1.25? not yet, mark to market, no way
FUGEDDABOUT IT.....lol.
remember, its not German, its not French, Its a SWISS SANDWICH
Phuked. a lot of long swiss vs euros, losses
its a lot of Strudel...
So he could still run for President of Switzerland then!
And the $2bn winner was?
I've been wondering the same thing. Maybe someone close to Mr. Hildebrand? Conspiracies aside, the counterpart probably hedged its risks somehow so it's not given that they would pocket 2 bln profits.
Employment advert:
Required. One prop trader, hopefully better than the last one!
Must have return ticket.
UBS listening to the SNB "talk", risk managers sleeping soundly (what kind of picture is that?). All kinds of commentary on how this would take a change in the Swiss Constitution (that is, a long-term discussion, permits unwinding). Risk managers sleeping soundly.
And WTF is a prop trader talking his book on FaceBook? OPSEC in the Swiss is 10E4 more than in NYC.
?
- Ned
These people got nothing on Goldman. GS would have had an midnight call whispering the move so they could dump the trade before the news. Bush league players.
Always collect favors......
Well that would be a hell of a vega trade ! 2bn loss what could be the notional value ? Can any prop trader take such a position in any investment bank ?!