Maria’s Note: Maria Bonaventura here, managing editor of the Diary, with an evening edition for you…

It comes from the desk of Andy Krieger, who made the front page of The Wall Street Journal after booking a $300 million profit from a single trade. And in a special event at 8 p.m. ET, Andy will break his silence about that trade for the first time on camera. Seven lucky folks will even get Andy’s research and trade recommendations, completely free.

If you’re interested, find out more here. Then read on to see how Andy’s trader’s intuition helped him move against the crowd in 1988… and added $80 million to his portfolio in a matter of hours…

It was early in 1988, and I was forming my big-picture views for the year.

In 1987, I’d ridden the dollar’s downtrend very profitably against the yen, Deutsche mark, British pound, and Swiss franc. I had closed all the positions at year-end, earning record profits.

I took a week off and tried not to think about the markets. But suddenly, a strange feeling hit me.

I was thinking about the First Intifada, the Palestinian uprising in the Middle East. The story had been in the press, and it got me thinking about a kind of “dollar uprising”…

After being beaten down the previous year, I felt that the dollar would soon start its own “violent protests” against the other currencies. Almost as if the dollar was oppressed… and it would rebel for its freedom and independence.

The dollar was on my mind for a reason: Numbers were about to come out for the U.S. trade deficit.

At that time, the market was heavily focused on trade data, and the dollar’s fortune rode on those releases. Every trader I knew was staying short the dollar. If the dollar were to take off and rally, it would be a horrible start to the year for them.

With how popular that trade was, I became more and more convinced that the dollar’s bear market was over. Its down move was overdone, and a major dollar recovery was coming.

At some core level the idea seemed idiotic. I had made a fortune selling dollars over the prior years, and habits built on successful feedback don’t die easily.

But when you’ve been in the markets long enough, you learn to become skeptical of overly popular trades. You learn to sense when overdone situations are due to reverse – and you learn to trust that intuitive voice.

So I bought a few billion dollars’ worth of one-year dollar calls against the mark and yen. I also bought over $5 billion worth of one-week puts on the British pound against the dollar. I felt that the British currency would be particularly vulnerable to the expected short-term dollar strength.

I was sure it was the right trade, but I also knew it would be a difficult one. Traders had been selling dollars profitably for years. I knew the market would fight the upside move.

I figured the market would need a jolt, a shock, in order to really start a major dollar reversal…

Major Dollar Shock

The U.S. trade numbers were coming out in several days, and I had a strong feeling that would be the catalyst for the dollar’s “uprising.”

The market’s expectation for the trade number was a deficit of $18 billion, a huge number at the time… but I thought the number would come in much lower – around $14 billion.

A smaller deficit would be very bullish for the dollar. But it would be bad news for all the traders betting against the dollar…

If the trade number came in much better than expected, speculators around the world would be scrambling to cover their short dollar exposures… and my dollar calls would shoot up in value.

In short, if my hunch was right, I would make a lot of money.

Everyone was anxious about the trade data as we got closer to the release. There was even a pool on the trading floor of Bankers Trust, where I worked at the time, with people betting on where the number would come in.

It came out to $13.8 billion – about $4 billion lower than the market expected. The trading room was eerily silent for a moment…

Then there was total bedlam on the floor. The market was caught short, the dollar started gapping higher, and traders around the world started panicking.

I was relaxed and enjoying the action. The longer-term dollar bets against the mark and yen had unrealized profits of about $30 million, but I was holding those positions, anticipating a bigger move over the coming weeks. My short-term bet on the British pound against the dollar earned $50 million in just a few hours.

Trusting my intuition paid off after all.


Andy Krieger
Editor, Andy Krieger Trading

P.S. At 8 p.m. ET, I’ll reveal the details of an imminent Black Swan event that could have a serious impact on your wealth

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