Not quite -- this guy didn&#x27;t naked short a put option on Maya crude. The plan was to dynamically hedge the position -- putting on a trading strategy that continuously neutralized the first partial derivative of the payoff function. The problem was the the second partial derivative was left unhedged -- oops! To put it technically, he was delta hedged but not vega hedged. Thus when volatility spiked he lost money. Even worse, he insured 2&#x2F;3 of Mexico&#x27;s entire production, so when things got bad there wasn&#x27;t even enough liquidity to maintain the delta hedge.<p>A better plan would be to come up with some sort of vega hedge using WTI volatility. WTI vol and Maya vol are correlated so some sort of partial hedge should have been possible, but it&#x27;s very tricky. This is why other banks were not interested. It sounded like he was either too lazy or arrogant to believe he need to vega hedge and it blew up in his face.