Victor Sperandeo is part of the select few traders that achieved a performance exceeding 5,000%. $10,000 at the start of his trading career in 1972, would have turned into $555,112 by 1990.
Throughout his entire career, Sperandeo has placed a greater emphasis on loss avoidance than on scoring large gains.
-Market Wizards
He was largely successful at this objective, stringing together eighteen consecutive winning years before registering his first loss in 1990 (18/19). Over this period, his average annual gain was 72 percent, with results ranging from a single loss of 35 percent in 1990 to five years of triple-digit gains.
Early days
Victor Sperandeos career on Wall Street started in the late 1960s. His journey commenced as a quote boy and later as a statistical clerk, where he gained valuable insights into the inner workings of the financial markets. It was during this time that Sperandeo developed a fascination with option trading, which would shape his future as a successful trader.
Driven by a desire for autonomy in his trading decisions, Sperandeo switched firms early in his career. This strategic move allowed him to earn significant commissions, but he encountered challenges with compensation structures and expenses at some of these firms.
In the midst of the 1969 bear market, Sperandeo switched jobs twice until he launched his own firm, Ragnar Options, in 1971. Within 6 months Ragnar gained prominence and became the largest over-the-counter (OTC) option dealer worldwide.
‘Sperandeo claims that Ragnar was the first option dealer to offer guaranteed quotes on options without charging exceptionally high premiums. If they couldn't find an existing option contract in themarket to meet a buyer's request (which they could purchase and resell at a premium), they wrote the option themselves.’
-Market Wizards
Ragnar was eventually merged with another company. Victor stayed on for a while but then joined Interstate Securities in 1978.
Victor wanted to maintain independence which he got at Interstate. He was given a company account and a few private accounts to manage at a 50/50 split. 8 years later, in 1986, Interstate went public and the trading group dissolved.
Between 2000 and the present, Victor Sperandeo held key positions as CEO and president of EAM Partners L.P. and Alpha Financial Technologies, LLC. Alpha Financial Technologies specialized in financial engineering and focused on futures-based indices research and development. it introduced several notable indices created by Sperandeo, including the DTI (Diversified Trends Indicator), FTI (Financial Trends Indicator), CTI (Commodity Trends Indicator), GERI (Global Equity Rotator Index), and FXTI (FX Trends Index).
During the period of 2002-2009, the DTI, FTI, and CTI indices were licensed by Standard & Poor (S&P) and referred to as the S&P Diversified Trends Indicator, S&P Financial Trends Indicator, and S&P Commodity Trends Indicator, respectively.
From 2009 onwards, AFT directly licensed its indices to providers and product developers for retail investors and financial institutions.
Aside from its financial systems, AFT held valuable patents in the investment market, including patents in the United States, Australia, and the Bahamas. These patents covered financial products utilizing long/short indexes or indicators to generate alpha while reducing risk.
AFT collaborated with various product issuers, such as Merrill Lynch, Credit Suisse, HSBC, Nomura, Macquarie Bank, UBS, Guggenheim Investments, and Wisdom-Tree, among others, to offer investment products associated with its indexes.
Trading Approach
Victor Sperandeo is widely acknowledged as an expert in commodities, particularly in the Energy and Metals sectors. His impressive market crash prediction during a Barron's interview in September 1987 garnered significant acclaim and showcased his profound comprehension of financial markets.
In more recent years, Sperandeo has gained prominence for his pioneering work in developing indexes and trading strategies specifically designed to capitalize on trends in futures prices. These encompass both actively managed strategies and rule-based algorithmic quantitative models.
Victor puts emphasis on being objective and taking advantage of underlying trends. At his core he is a trend trader. Central to his trading philosophy is his meticulous analysis of market price movements and the assessment of their life-expectancy profiles to gauge risk exposure.
‘Remember, there are three trends-the short-term, the intermediate term, and the long-term. Each trend is moving all the time and may be going in a direction opposing the other two. The short-term trend changes more rapidly and more often than the intermediate trend, and the intermediate trend changes more rapidly and more often than the long-term trend. Know which trend you are involved in and its correlation with the other two.’
Victor does not care about being long or short side. Overall as trends persist, he automatically leans toward the long side in the long term.
‘Many market participants are either predominantly bulls or bears and have a tendency to always be long or always be short. In fact, most market participants avoid playing the short side like a plague. This is a big mistake that defies the nature of market action. If "the trend is your friend," then playing both sides of the market is the best way to maintain a successful and lasting personal relationship’
He advocates for cutting losses fast and to add to winning positions, a trait prior traders we discussed have shown. As he puts it, averaging down is the process of either avoiding to admit being wrong or the hope to recover a loss. It is called ‘averaging down’ because it is the process of adding to a loser to reduce the percentage loss.
Victor believes in introspection and a review process. All major events within the performance journey have deep rooted behavioral patterns and lessons to learn from.
"If you can truly and honestly identify the reasons you make a mistake, then your chances of making it again are much less. Most often, mistakes are rooted not in ignorance, but fear: fear of being wrong, fear of feeling humiliated, and so forth. To trade well, you have to conquer fear; and to conquer fear, you first have to admit having it, which means admitting your mistakes and analyzing them,"
Through his research, he discovered that in a bull market, the median extent of an intermediate swing in the Dow was approximately 20 percent. This meant that once the market surpassed this threshold, the likelihood of further appreciation diminished significantly. Sperandeo's approach revolved around speculating when the odds were in his favor, rather than merely relying on blind speculation.
Victor Sperandeo's emphasizes emotional discipline and the ability to admit mistakes, particularly in an industry where ego and emotions can cloud judgment. Sperandeo's skepticism towards buy-and-hold strategies, coupled with his incorporation of chart analysis as a tool, added further depth to his approach.
Final thoughts
Victor is recognized as a pioneer in many spaces, especially in the option realm. His multi stage analysis allowed him to pinpoint multiple bottoms and crashes.
‘Victor is renowned for having predicted the stock market crash of 1987 during an extensive interview in the September 21 issue of Barron's; on October 16, one trading session prior to Black Monday, Sperandeo shorted the Dow and made 300% during a day the DJIA fell by over 20%.’
He has been featured twice in Barron’s, “Man of all Markets”, on May 2, 1983, and “Trader Vic the Ultimate Wall Street Pro”, on September 21, 1987 — and been quoted in The Wall Street Journal and Stocks & Commodities.
In 2008, Sperandeo was inducted into the Trader Hall of Fame by Trader Magazine.
Sperandeo has over 45 successful years on Wall Street in trading independently with his own money and on behalf of big names and other notable investors such as Leon Cooperman and George Soros. He managed futures trading for EAM Group of Companies and global investment banks such as HSBC, RBS and Nomura.
He is without a doubt one of the most overlooked legendary traders, given his involvement is such a large amount of different spaces within the industry.
You substack is a treasure chest. I am looking forward to buy your book if you ever publish one (which I am sure will happen over the next 20 years).