Niederhoffer Says Monday’s Plunge Wiped It Out

A well-known trading firm is apparently the first to acknowledge it was wiped out in Monday’s stock market rout. Niederhoffer Investments Inc. says it incorrectly bet U.S. stocks would rise when the market had its biggest point loss ever.

Niederhoffer had taken options on the Chicago Mercantile Exchange’s S&P; 500 futures index and was unable to meet its obligations at the end of the day, the company said in a statement Wednesday. The Dow Jones industrial average fell 554 points, or 7.2%, on Monday before roaring back Tuesday.

“Sadly, it would appear that if it had been possible to delay liquidating most of the funds’ accounts for one more day, a liquidation could have been avoided,” said the statement, which was unsigned.

“Nevertheless, we cannot deal with ‘would have been.’ We took risks. This time we did not succeed, and I regret to say that all of us have suffered some very large losses.

“Right now, the indications are that the entire equity positions in the funds [have] been wiped out.”

Company principal Victor Niederhoffer did not return messages left at his home in Weston, Conn., seeking comment.

Exchange spokesman Ellen Resnick said it does not comment on individual members or their clearing situations.

“It’s been a real rough period,” said a Niederhoffer employee in Chicago, who asked that his name not be used. “We lost our own personal money, and we have some 300 customers who have also lost most of their money. We have no idea what the losses are at this time.”

The Mercantile’s S&P; 500 has been a favorite with large institutional investors, which speculate or hedge their stock portfolios by betting where the stock market will end up on a given day.

Connecticut-based Niederhoffer has been a star performer for more than a decade, providing average returns to its investors of about 28% a year, with a cumulative return of 122.5% in the last three years.