-42-
speculative “legs”, however, Mr. Borst believed that Tandrill “made
the best of a deteriorating situation”. The last three spreads
Tandrill bought on December 7 resulted in its reducing its profit
further, but it was short two extra March Treasury bill futures,
which it also covered at this point at the lowest price of any
March transaction.
Conclusion
Mr. Borst opined that the aforementioned trading transactions
were “very sophisticated”. Tandrill’s trader managed huge
positions very “adroitly” in extremely volatile financial
instruments and a volatile financial market. Mr. Borst concluded
that because Tandrill earned approximately $78,000 during a 2-1/2
month period, such fact demonstrated the high quality of Tandrill’s
trading ability, as well as the fact that Tandrill’s strategies had
the economic potential to earn a profit.
Mr. Natenberg’s Rebuttal of Mr. Borst’s Report
Mr. Natenberg disagreed with Mr. Borst’s conclusions.
According to Mr. Natenberg, while a trader may hedge, the fact that
he does so is not necessarily a sign of experience. A new trader
may choose a poor hedge, either one where the trader misjudges the
amount of protection offered by the hedge, or one where the cost of
the hedge is too great relative to the protection. Nor does the
fact that a hedge is constructed necessarily show that it was done
with the intention of earning a profit, either in the hedge or in
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 NextLast modified: May 25, 2011