Author Gregory Zuckerman chronicles the greatest trade ever made as measured by the largest one-year payout. In 2007, hedge-fund manager John Paulson made his firm $15 billion buying credit default swaps (CDS); a derivative security that serves as insurance on risky mortgages.
It was the fall of 2007, financial markets were collapsing, and Wall Street firms were losing massive amounts of money, as if they were trying to give back a decade’s worth of profits in a few brutal months. An investor named John Paulson somehow was scoring huge profits. His winnings were so enormous they seemed unreal, even cartoonish. His firm, Paulson & Co., would make $15 billion in 2007.
Zuckerman continued to follow Paulson and more recently wrote a short article (also in the WSJ) citing that the famed investor has had little luck since the series of trades that generated such a windfall. Fortunately, you really only need to pull it off once.
See the article cited below for more details on the trade.