How do financial traders take vacations?

Factual Questions
1

Bloomberg has a story of a trader who lost $80M while on Christmas vacation and hasn’t been back to work since.

Which makes me wonder what the typical protocol is for traders when they take vacation. The possibilities I can imagine are:

  1. Close out all positions before you leave, reopen then again when you come back. Con is it’s a significant cost to close out a position.

  2. Keep all positions running on autopilot, pray no significant news breaks while you are gone. Con is exactly what happened in the article.

  3. Keep actively monitoring & trading all of your positions while you’re on vacation. Con is you’re not really on vacation if you’re doing that.

  4. Hand off your trades to another person to manage while you’re gone. Con is you need to spend a lot of time to hand off and there’s no guarantee your replacement will be making good decisions on your trades.

Now I’m sure different traders take a mix of the above approaches but I’m wondering if certain approaches are more common in different industries or whether there’s any set protocol around it.

2

it’s 4. banks (most or all) require a 2 week per year vacation period in order to audit the portfolio. the trader will leave his backup with a set of conditions for trading his portfolio and take off.

3

Some financial institutions require that traders take 1-2 weeks consecutive vacation with someone else watching your positions (a la #4) by the principle that if you are committing fraud it will probably be uncovered during that time.

I’d have to imagine regular vacations are handled the same way, and what happened here is highly irregular.

4

If you’re doing customer-facing trading with a “book” (making markets but also running long-term positions, like an OTC options trader or a swaps trader), there will usually be a team of traders involved, who cover each another routinely through time zones, and obviously vacations.

A senior hedge fund trader might leave junior people in charge with varying degrees of discretion; although it’s generally a good idea to avoid making trading decisions “by committee”. If you’re running individual proprietary positions, well - obviously these days you can remain in touch with the markets pretty much anywhere as much as you choose to. Otherwise, you will use some combination of call levels & firm stop-loss orders - just as you would when sleeping.

5

It is #4. Any reputable firm requires staff including traders to take at least one if not two weeks off. It is part of risk control. If a trader is hiding trades, out of compliance, etc, it will usually show up if they can’t access the systems for 1-2 weeks. Banks have been burned in the past by traders and IT folks pulling off scams that required daily check in’s, and therefore they didn’t take the required vacation time out of office.

6

I’m not in touch with trading now, but 20 years ago, you’d get fired for loosing a lot of money, even if you did it correctly. That is, your contract wouldn’t be renewed. It was a known problem with the trading houses: if you were running a loosing position, you might as well gamble bigger and bigger, because if your gamble paid off, you’d get a big bonus: if it didn’t, well you were going to be terminated anyway.

There’s a question mark in my mind about this one: did they fail to close out his positions in a timely manner? In which case it might be partly somebody else’s fault. But maybe he was losing anyway, and just took one last big gamble.

7

Remember Nick Leeson. He never took a vacation and by the time his swindle was uncovered, his bank was underwater and closed.

8

So are the senior hedge fund traders always keeping junior people up to date on the general pulse of every trade every workday or do they get them up to speed before the vacation and then take over and trade independently again once they get back?