The World's Largest Hedge Fund is a Fraud - qwafafew

of half that amount or 50 cents. Therefore if the market dropped 1.1%, a .50 delta
put would increase in price by 0.55%, resulting in a -0.55% loss for the fund.
B. However, for all market drops greater than 1.1%, BM would experience a larger
than -0.55% monthly loss and there were numerous instances of monthly market
losses greater than -1.1% during the time period.
C. Therefore, BM, in order to limit his losses would be forced to buy a series of
shorter dated, higher delta put options with high gamma (a 2 nd derivative term
denoting that for each $1 change in index price, how much the 1 st derivative term
delta would change. Gamma is the change in price of Delta and Delta is the
change in price of the Option with respect to the Index’s Price). If you aren’t
intimately familiar with calculus, the English translation is that BM would need to
be buying a continuing series of 1 day put options because these options and only
these options would have the high gamma he would need to ensure that his delta
changed rapidly enough to protect his portfolio enough so that he could never
experience a greater than 0-0.55% monthly loss. If you’ve gotten this far, then if
a one-year at-the-money OTC OEX index put option cost 8%, a continuing series
of 253 (because that’s how many trading days are in a year) one-day, at-themoney
puts, would cost the square root of 253 or 15.9 times the cost of the oneyear
put. 15.9 times 8% the one year put’s cost = 127.2% is the cost of a
continuing series of one-day, at-the-money index put options if a one-year, at-themoney
index put’s cost is 8%. And this is a very conservative set of calculations!
Consider that one would be carrying over stock positions in this strategy over
weekends, so therefore you’d want 365 one-day, at-the-money put options and the
square root of 365 is 19.1, so a truer cost of put protection would be 19.1 x 8% =
152.8%. That would mean BM’s stock picking ability is not only the world’s best
but that he’d likely have to be an alien from outer-space to be able to pick stocks
that went up over 152.8% per year + the 16% gross returns to the HFOF investors
+ an assumed 4% he’s making in commissions. Therefore his stock picking
ability would need to return 170% or so per year in order for him to be carrying
out his strategy as he says he is in the HFOF third party marketing materials.
D. 170% per year from stock-picking is not likely for any human born on the planet
earth so if BM’s achieving these types of returns then he may be an alien species
from another planet. A DNA test would be sufficient to determine whether this
might be the case. However, if BM is an alien being possessing superior stockpicking
skills of this magnitude, this would be seen as an unfair advantage in the
marketplace and likely would panic the financial markets. Or maybe he’s human
and just a fraudster – take your pick.
E. Anyone capable of earning 170% per year from stock-picking would not need nor
want any investors.
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