Originally posted at forexfactory on Aug 20, 2010
Just read this today and thought it interesting enough to share:
“In 2008, for example, Mr. Pia entered into a trade under which Moore would get a $25 million payout if the New Zealand dollar rose to a certain level. Goldman Sachs Group Inc. was on the hook to make the payout. If that level wasn’t hit, Moore stood to lose $1 million.
As the trade’s expiration date approached, the New Zealand dollar was trading about 25 cents below the price at which the contract would pay out. Mr. Pia got clearance from top Moore officials to spend billions buying New Zealand dollars, hoping the currency would hit the set price, according to the person with knowledge of the trade. Fifteen minutes before the contract expired, Mr. Pia began buying billions of New Zealand dollars, lifting the currency to the price at which Moore was able to collect the $25 million, the person says.
Gary Cohn, Goldman’s president, later congratulated Mr. Pia on the trade, the person says.”
I wouldn’t think it would take “billions” to move a thin pair like the kiwi, even 1 billion can purportedly move EUR/USD quite a bit. Interesting story nonetheless..
Sounds like he was holding a One Touch option. Although It seems there was some typo or mis information in the article. No one is dumb enough(except rogue traders) to spend billions on kiwi trying to move the market 25cents (2,500 pips) in 15 fifteen minutes LOL, just to make that payout. It was a very big exotic option payout for the less liquid nzd/usd to be sure. Although it would be interesting to see how much much money he lost liquidating those purported yards and yards of long kiwi.