Wall Street billionaire Thomas Peterffy reveals his worst trade – and why he's never read investing books

• Interactive Brokers' founder revealed the worst trade of his career in a recent interview.
• Thomas Peterffy said spotting a stock to short was easier than finding a compelling one to buy.
• Peterffy has never read an investing book as he doesn't believe there are any big secrets to learn.

The billionaire founder of Interactive Brokers has revealed his worst trade, outlined one big attraction of betting against stocks, and explained why he's never read a book about investing.

Thomas Peterffy, whose near-75% stake in his electronic brokerage makes up most of his estimated $27 billion fortune, recounted to Forbes a painful trade involving DuPont in the late 1970s.

He was betting on the chemicals giant, and one day he bought 300 bullish call options that were a couple of days from expiring, at a price of $18 per contract.

"I was a little guy who was investing only my own savings," he said. "It was the biggest trade I had ever done up to that point."

Soon after, someone else walked onto the trading floor asking to buy 500 of the options.

"I was so carried away by my sudden, very short-term gain in five minutes that I sold him 500 call options at $31," Peterffy recalled. "I made a huge amount of money, but the only problem was that I sold 200 more than I had."

Immediately after the man left, trading of the stock was halted, and news broke that DuPont had reported outstanding earnings and was splitting its stock. Peterffy was forced to buy back the 200 options at $450 each — nearly 15 times what he'd charged for them.

"That, of course, was something like $80,000, which was half my capital I'd spent 10 years trading up for," Peterffy said. "It was a huge hit. That was the worst trade I ever had in my life."

Peterffy told Forbes that his key takeaway was to never sell cheap options, and to always be mindful of the risk that people possess inside information.

The Interactive Brokers chairman also recalled his first major wager, which he placed after touring the office of a rival market maker called Knight Trading Group in the late 1990s.

"I spent half the day there, and I became so convinced that it was a really lousy operation, so I shorted a lot of stock," he said. The stock plunged by roughly 80% over the next three months, meaning Peterffy pocketed a tidy $30 million or so, he said.

Peterffy told Forbes that finding compelling stocks to bet on requires a lot of effort and in-depth analysis. In contrast, spotting a good short can be as simple as seeing a stock soaring, then "you look underneath the hood and you find that there is nothing much there," he said.

The veteran entrepreneur, who warned last summer that stocks would likely fall and a recession seemed certain, also made the case that investing isn't a mysterious art, but rather about logic and facts.

"I basically think there are no important secrets in how to invest, and there is not a lot you can learn from others," he said.

"You know, I've never read a book on investments," Peterffy continued. "People who write investment books, you have to ask yourself the question: Why would they do that? If they really knew something, they would keep it to themselves."