Louis Bacon / 1990 / Macro
One shock, two expressions.
Louis Bacon and oil-long, equity-short positioning.
Before the outcome was obvious.
The workbook’s Gulf War case combines two exposures around the same geopolitical shock: higher oil prices and weaker equities. It is a useful example of translating one thesis into several markets. Two positions do not automatically create diversification, however. If both depend on the same event, they may be different expressions of a single concentrated risk.
What could have gone wrong
A rapid resolution or a different policy response could reverse both legs. Correlations are unstable during shocks.
Count underlying bets, not just the number of positions.
Put the thesis to the test.
Change the assumptions and watch the arithmetic update. These are simplified scenarios; they do not recreate the instrument’s pricing or the path of the trade.
How this model works
Profit ratio = profit ÷ stated position. Exposure ratio = stated position ÷ fund assets. Neither is a measure of maximum loss or a net investor return.
The workbook’s simple annualisation is profit ratio × 365 ÷ duration = 243.3%. It is linear, not compounded, and is not a repeatable annual return. Fees, financing, collateral, premium carry and changing exposures are not modelled.
What these figures mean.
Source: Legendary Trades Models, Master Comparison!A19:L19; Trade P&L Models, case 16. The following are original workbook inputs, preserved for transparency. They are estimates, not independently audited results.
- Workbook position
- $500m
- Workbook “gross profit”
- $300m
- Workbook duration
- 90 days
- Workbook fund assets
- $500m
- Workbook fund return
- 86%
- Workbook position ROI
- 60%
The fund-return field is a separate source claim, not a calculated result of this trade. Its reporting period and gross/net basis are not independently established here. Model ratios are recalculated from inputs rather than copied from rounded source ROI values.