Andrew Krieger: the man who shorted an entire country

In 1987, a 32-year-old trader built a position so large it was bigger than an entire country's money supply — and a central bank had to step in to stop him.

The setup

The week after Black Monday — 19 October 1987, when the Dow fell about 22% in a single day — markets were in chaos and every trader was hunting for the next domino to fall. Andrew "Andy" Krieger, a currency trader at Bankers Trust, found it in an unlikely place: the New Zealand dollar, the "kiwi."

While panic pushed money around the majors, Krieger judged the kiwi to be wildly overvalued for such a small, export-dependent economy. His bank had handed him an unusual amount of rope — a reported $700 million trading limit, far above his desk peers.

The trade

Krieger didn't just sell the kiwi. Using options to stack leverage estimated at 400:1, he built a short position reportedly larger than New Zealand's entire money supply. Within hours the NZD dropped around 5% against the dollar. The story goes that the Reserve Bank of New Zealand called Bankers Trust to ask what was going on — and ultimately had to intervene to steady its own currency.

The result: about $300 million in profit for the bank. Krieger's personal bonus? $3 million — which he reportedly considered an insult, roughly 1% of what he'd made. He resigned in 1988 and went to work for George Soros.

What it actually teaches

The Krieger legend is fun, but the lesson isn't "swing 400:1 and get rich." It's the opposite. Three things made that trade — and all three are things we obsess over here:

• Currency strength, not price. Krieger wasn't trading a chart; he was trading a currency he judged fundamentally overvalued. That's exactly the read our FOTSI currency-strength oscillator is built for.
• Liquidity. The kiwi moved so violently because it's thin. Understanding liquidity in forex is why the same headline barely nudges EUR/USD but whipsaws a minor.
• Leverage cuts both ways. 400:1 made Krieger famous; it also makes most retail accounts disappear. Before you copy the legend, read what leverage really does and how to size a position.

Krieger had a bank's balance sheet, a $700M limit, and a central bank as his counterparty. You have a retail account. Admire the story — then trade your own size.

How was the position actually built?

This is what most retellings skip, and it is the part with something to teach. Krieger did not simply sell kiwi in the spot market — a position that size could not have been built there without moving the price against himself long before it was finished.

He used options. Buying puts on the New Zealand dollar let him control a very large notional exposure for a fraction of the capital, which is where the reported 400:1 leverage figure comes from. It is a ratio of exposure to capital committed, not borrowed money in the ordinary sense.

Three features of that structure matter more than the headline number:

• Defined cost. The most a bought option can lose is the premium paid. Against a $700 million limit, that put a floor under the downside of an otherwise reckless-sounding position.
• The counterparty inherits the risk. Every option he bought was written by a dealer who then had to hedge it — by selling kiwi themselves. In a currency as thin as the New Zealand dollar, that hedging flow amplified the very move he was betting on.
• Thin market, outsized effect. The same trade in EUR/USD would have been absorbed. This is why liquidity is the hidden variable in the story: the kiwi's small float is what turned a large position into a market event.

Why can't a retail trader copy this?

Because almost none of the ingredients are available to one. Krieger had a bank's balance sheet behind him, a $700 million institutional limit, direct dealer relationships, and an options desk to structure the trade. A retail account has none of those, and retail "400:1" means something entirely different — margin on a spot position, where losses are not capped at a premium but run until the account is closed out.

The transferable lesson is not the leverage. It is the reasoning: he formed a view on a currency rather than a chart, and he picked the one where a given amount of pressure would move price furthest. Those two judgments cost nothing to copy.

Figures throughout are widely reported historical accounts of the 1987 episode.