Andrew Krieger vs the Kiwi: The Legendary 1987 Currency Raid

In the chaotic weeks following Black Monday — the October 1987 stock market crash that sent traders scrambling to find safety — one currency trader at Bankers Trust reportedly built a position in the New Zealand dollar so large it became the stuff of legend. Andrew Krieger's short of the Kiwi in late 1987 is one of the most retold stories in forex history: a tale of extreme leverage, options mastery, a reported $300 million profit, a bonus dispute, and a resignation that left the industry talking for years. It also carries a clear warning about what extreme leverage can mean in practice.

A note before proceeding: many of the figures in this story are widely repeated but difficult to verify against primary sources. Where details are disputed or unconfirmed, this account explicitly flags them as reported or according to published accounts — not as established fact.

Who was Andrew Krieger?

Andrew (Andy) Krieger is an American currency trader who studied at the Wharton School of the University of Pennsylvania before entering finance. He worked at Salomon Brothers before joining Bankers Trust in 1986, where he became a currency options trader.

According to published accounts including profiles in Earn2Trade and various trading histories, Krieger was considered exceptionally skilled in options pricing and strategy — at a time when currency options were still relatively new instruments and few traders fully understood their properties. This expertise reportedly led Bankers Trust to grant him a much larger dealing limit than was standard: accounts suggest his limit was around $700 million, compared to the $50 million typical for most traders at the bank.

The setup: Black Monday and the Kiwi's overvaluation

Black Monday — 19 October 1987 — sent the Dow Jones Industrial Average down 22.6% in a single session, the largest single-day percentage decline in US market history. The crash triggered a global flight to perceived safe havens and a scramble to reassess which assets were overvalued in a post-crash world.

Krieger's thesis, according to multiple accounts, was that the New Zealand dollar had appreciated significantly in the years before Black Monday and remained overvalued once the crash had recalibrated global risk sentiment. New Zealand had relatively high interest rates at the time, attracting carry-trade inflows that had bid up the NZD beyond what fundamentals supported. With the crash changing the risk calculus globally, Krieger saw the Kiwi as ripe for a sharp correction.

How did the trade actually work?

The mechanics of the Krieger trade are what separate it from a simple directional bet. Rather than shorting NZD spot directly, Krieger primarily used currency options — specifically, it appears, a combination of put options (the right to sell NZD at a set price) and options strategies that gave him very large notional exposure relative to the premium he paid.

Options leverage works differently from futures or spot leverage. A position that costs, say, $10 million in option premium can control far more than $10 million of underlying notional — depending on the structure, the delta, and how far in-the-money the options are. At the leverage levels cited in various accounts — reportedly exceeding 400:1 — even modest premium outlay could produce notional NZD exposure running into the billions.

The claim that Krieger's position exceeded New Zealand's entire money supply is the most dramatic element of the story and deserves specific scrutiny. It appears in multiple profiles and trading histories, and it is mathematically plausible given the leverage levels reported. But it has never been confirmed by an official source — not by Bankers Trust, not by the RBNZ, and not by Krieger himself in any precise way. New Zealand's M1 money supply in 1987 was roughly in the range of NZD 10–15 billion. A position of $700 million in NZD options with 400:1 leverage could theoretically produce notional exposure in that range. It is a compelling and possibly accurate claim — but readers should treat it as reported, not established fact.

The bonus dispute and departure

If the trade was the dramatic centrepiece of Krieger's story, the aftermath was equally instructive about the culture of Wall Street at the time. According to multiple published accounts, Krieger received approximately $3 million in total compensation for the year — salary plus bonus — despite the trade reportedly generating around $300 million for Bankers Trust.

Krieger reportedly viewed a payout of approximately 1% of the profit as inadequate given the skill and risk involved. He resigned from Bankers Trust in 1988. It is worth noting that Bankers Trust subsequently came under investigation for separately overstating its currency options portfolio by approximately $80 million — an issue that regulators later disclosed, and which some industry observers linked to the complexity of the positions its options traders had built, though a direct link to Krieger's book has not been established.

After leaving Bankers Trust, Krieger worked at other firms and later published his 1992 book. He has periodically re-emerged in public commentary on currency markets, and maintains a market newsletter as of the time of writing.

What does the Krieger story teach macro traders?

The NZD trade of 1987 is retold for a reason: it compresses several important lessons into one dramatic episode.

Conviction backed by analysis. Krieger did not short the Kiwi on a whim. He had a specific fundamental thesis — an overvalued currency that had benefited from carry flows that Black Monday would now reverse — and he sized the trade in proportion to his conviction. The greatest macro traders share this quality: they form a view, build a position that reflects that view, and manage it with discipline.

Extreme leverage is a two-sided weapon. A 400:1 position works magnificently when you are right and the market moves in your direction before you are forced out. It is catastrophic when the reverse happens. Krieger was right; the NZD fell; the trade worked. But the same mechanics that generated those returns could have generated an equally large loss. For context on how Soros managed a trade of similar ambition — equally concentrated but perhaps better-publicised — see the Black Wednesday story.

Options are not just insurance. Krieger exploited a property of options that is still underappreciated: the ability to gain massive notional exposure relative to the upfront cost. That is useful for hedging, but in the hands of a trader with a directional view, it becomes a return amplifier. Soros's reflexivity framework similarly used options to skew the asymmetry of his GBP trade in 1992.

Institutional risk vs personal reward. The bonus dispute highlights a structural tension in proprietary trading: the trader's personal downside (losing their job) is bounded in a way their upside (a share of profits) is not. This misalignment can incentivise risk-taking beyond what the institution actually wants. It is a recurring theme in post-crisis financial regulation.

The NZD — the currency Krieger made famous — remains one of the most traded G10 currencies and is tracked daily on the Pip Theory macro meter. Its sensitivity to global risk appetite, New Zealand's terms of trade, and RBNZ policy makes it a currency that still rewards patient, fundamental macro analysis of the kind Krieger demonstrated in 1987.

Educational macro context only — not investment advice.