Market volatility that wiped about $1.25 trillion off the value of U.S. shares has left the world’s biggest publicly traded hedge fund firm nursing a hangover as nine years of stock market celebrations came to a halt -- for now at least.

Man Group Plc fell as much as 7.9 percent, the most in almost 11 months, as one of the firm’s main funds dropped on rising volatility. Trading volume in the stock was more than double the daily average of the past three months. A spokeswoman for the London-based firm declined to comment.

"Traders who were short volatility just had to puke," said Tobias Hekster, co-chief investment officer at True Partner Advisor, who was speaking generally ahead of trade opening in the U.S. on Tuesday. "And our expectation is we’re not done yet." The Dow Jones fell more 500 points after the opening bell.

Hekster’s relative-value volatility hedge fund surged 14 percent in two days through Tuesday as turmoil roiled the stock market, he said, profiting from price movements between indexes in the U.S., Korea, Taiwan and Japan. The fund purchases volatility equity index options that it thinks are underpriced and sells those that it believes are overvalued.

The CBOE Volatility Index had its biggest ever rally on Monday, hurting investors who had piled into products betting on low volatility after central bank policy helped it to record lows last year. Fears that the Federal Reserve will quicken monetary policy tightening caused shares to fall and former Chair Janet Yellen said Friday that U.S. stock prices are “high.”

“Yesterday’s move has certainly generated a lot of damage for all implicit short volatility strategies, including trend followers,” said Nicolas Roth, head of alternative assets at Geneva-based Reyl & Cie. “Most systems are designed somehow to capture trends and this sell-off appeared out of nowhere for a quantitative system.”

65% Loss

One firm caught up in the turmoil was Option Solutions LLC. The hedge fund firm that trades equity options lost as much as 65 percent after it was forced to sell holdings overnight.

“The market became completely illiquid as volatility increased far in excess of the market movement,” Paolo Compagno, a partner at the London-based firm, said in an email to investors seen by Bloomberg News. “We were forced to liquidate throughout the night and morning.”

The firm and fund remain in business and will waive its incentive fee, or slice of profits, for new investors until the fund returns to its high watermark, he said in an interview. The firm had managed about 65 million euros ($80 million) before the losses, he said.

Man AHL Diversified Futures plunged about 4.6 percent on Monday as market trends suddenly reversed, leaving the fund flat for the year, according to a person with knowledge of the matter. The strategy "had a very bad day yesterday, that’s not a surprise,” said David McCann, an analyst at Numis Securities Ltd. “That’s in the context of some very good performance year-to-date."

Flash Crash

The return of volatility was a long time coming for True Partner, which oversees about $325 million and acts as a hedge against greater levels of turbulence in global financial markets. Last year the flagship fund was down 5.6 percent, and up 0.4 percent in 2016. The fund had gained about 17 percent in 2015, benefiting from the flash crash that year.

That was the “last interesting day for us," Hekster said.

To contact the reporters on this story: Suzy Waite in London at swaite8@bloomberg.net, Nishant Kumar in London at nkumar173@bloomberg.net, Saijel Kishan in New York at skishan@bloomberg.net.