So most derivatives-based hedge funds are just rock solid, not a worry in the world?
It depends entirely on the purpose of owning the derivatives for the individual fund. [disclaimer: I manage a hedge fund]. First, there are many kinds of derivatives. The futures market is larger than the stock market. Those futures contracts are used for many purposes - primarily to transfer risk.
Admittedly, there are firms like the one in the article that use derivatives in a very risky manner. I objected primarily to the title, which painted dire consequences to all hedge funds. This was a small event in the grand scheme of things.
best, ampu