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The World’s Most Famous Options Traders
Options trading has grown in popularity in recent years, as sophisticated traders have sought greater flexibility and versatility in their portfolio. Options allow traders to adapt or adjust their position based on new information, a critical advantage in a highly complex global financial market. For this reason, options are seen as a prudent investment tool that can help traders diversify their portfolio and increase profitability.[1]
There have been many successful options traders over the years who have used this powerful investment strategy to reap amazing rewards in the market. Below is a lists of five such traders and their backstory.
Paul Tudor Jones
Paul Tudor Jones is one of the most renowned investors of all time. He made his name decades ago by shorting the 1987 stock market crash. Jones recognized that, in the case of a bear market, investors are more likely to employ their put options as a form of portfolio insurance. He turned out to be right and on Black Monday 1987 was able to triple his capital off short positions.
Jones went on to found Tudor Investment Corporation, a $12 billion hedge fund.[2] He is currently ranked #308 on the Forbes Billionaires list with a net worth of $4.7 billion.[3]
George Soros
George Soros, the man who broke the Bank of England, is also an options trader. In fact, the large bulk of Soros’ investment portfolio is in options positions. As of September 2015, Soros had a large position in call options in the SPDR S&P 500 Exchange Traded Fund (NYSE: SPY). He reportedly added nearly 9 million SPY call options, which represents about 16% of his portfolio. Additionally, Soros still owns around 2.4 million in SPY put options, allowing him to play both sides of the market. As one can clearly tell by this, the call options are betting on an increase in the US stock market while the put options are calling for a decline.[4]
Whatever the case may be, Soros knows what he’s doing. He has amassed a staggering $24.9 billion over the course of his lifetime, making him one of the world’s wealthiest people. Forbes gave him a self-made score of 10, which is the highest level one can attain.[5]
Andy Krieger
Andy Krieger might not be a household name, but is one of the best options traders of all time. Like Paul Tudor Jones, Krieger capitalized on the Black Monday crash of 1987, where he used options (a relatively new instrument at the time) to short the New Zealand dollar. In fact, he shorted so many New Zealand dollars (also known as kiwis), that his sell orders exceeded New Zealand’s available money supply. The value of the kiwi declined between 3% and 5%, netting Krieger’s employers $300 million. He received a $3 million bonus for his efforts.[6]
Edward Thorp
Edward Thorp is one of the most interesting people on this list. A University of California-trained mathematician, Thorp went on to become a successful author and hedge fund manager who applied probability theory to the financial markets. Thorp authored several papers on options theory and is renowned for his remarkably consistent returns. He had an amazing knack for applying his knowledge of statistics to the stock market, where he successfully exploited price anomalies. In 2012, Thorp had an estimated net worth of $800 million.[7]
Blair Hull
Another lesser known options guru, Blair Hull was able to leverage technology and quantitative models to make hundreds of millions of dollars in the futures, options, cash equities and ETF markets. He spent a dozen years building an electronic trading company before selling it to Goldman Sachs in 1999 for $531 million. Bound by a non-compete clause, Hall entered politics as a Democrat before losing to Barack Obama in the 2004 Illinois primary.[8]
This is what Worth Magazine had to say about Hull:
“His computers trade stocks faster than the human eye can see them scroll on a screen. The system is designed to predict patterns that will unfold in the market over periods as short as two minutes. In a business that isn’t normally modest about its technological savvy, Hull and his automated trading shop are the envy of Wall Street’s top firms.”
[1] Nasdaq. The NASDAQ Options Trading Guide.
[2] James Kerin (November 25, 2012). “3 Of The Best Traders Alive.” Investopedia.
[3] Forbes. The World’s Billionaires: #308 Paul Tudor Jones, II.
[4] John Edwards. “This Is What George Soros’ Portfolio Looks Like (SPY, YPF).” Investopedia.
[5] Forbes. The World’s Billionaires: 23 George Soros.
[6] Lisa Mahapatra and Linette Lopez (February 22, 2013). “The Greatest Trades In Wall Street History.” Business Insider
[7] TheRichest. Edward Thorp Net Worth.
[8] Antoine Gara (September 9, 2015). “How Blackjack Ace Blair Hull Is Playing The Odds To Beat The Market With A New ETF.” Forbes.
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