Paul Tudor Jones / 1987 / Equity Short
The selling fed on itself.
Paul Tudor Jones and a market whose defences could amplify its fall.
Before the outcome was obvious.
The workbook connects Jones’s 1987 short with historical pattern analysis and portfolio insurance. The Federal Reserve’s account describes concerns about strategies that sold more stocks and futures as prices fell. A mechanism meant to protect individual portfolios could add to collective selling pressure. That makes this case useful beyond any chart analogy: understand how other participants are required to react when prices move.
What could have gone wrong
Historical similarities do not guarantee the same outcome. Futures leverage and violent rebounds can make a directional bet expensive very quickly.
Look for forced behaviour. The next seller may be following a rule rather than making a fresh judgment.
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 = 521.4%. 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!A8:L8; Trade P&L Models, case 5. The following are original workbook inputs, preserved for transparency. They are estimates, not independently audited results.
- Workbook position
- $500m
- Workbook “gross profit”
- $100m
- Workbook duration
- 14 days
- Workbook fund assets
- $300m
- Workbook fund return
- 125.9%
- Workbook position ROI
- 20%
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.
Historical context: Federal Reserve · A brief history of the 1987 stock market crash ↗. This source supports the context discussed above; it does not validate every workbook input.