SIUYA

DayTrade999. This is a very open ended question, and there is no one size fits all answer. Sticking to the aspect of leverage and fund managers (and not just how they invest)..... First ... you have to understand that fund managers have an investment strategy or mandate that they follow. Its ideally their expertise, and is simply a product offered to investors. They are limited in what they can do by this mandate. Second..... Most fund managers dont use leverage. The vast volume/amount/size/number of fund and fund managers dont use leverage. Those that do sometimes disguise it - because either they or their clients dont really understand it. Plus its often easier to sell something that seems less risky than it is. (While examples such as gold will not go down to zero are valid and hence people justify that its less risky etc. Think about leverage in these simple terms - anytime you can loose more than you have available.....you are leveraged) Third.... When it is used it can be used by borrowing from others and servicing a loan, investing in instruments that require an exchange margin, investing via other derivative products (OTC), (these do not necessarily mean the manager is leveraged), or simply investing in products that themselves are leveraged. eg; some, REITS, ETFs or other funds. For really in depth info, there is only one answer as every fund is different. Research their investment styles and mandates. For generic answers.....research the internet. eg; http://en.wikipedia.org/wiki/Leverage_(finance) Hedge funds wary of high leverage - FT.com http://aima-canada.org/doc_bin/AIMA_Canada_StrategyPaper_06_Leverage.pdf

Hi Rande, by chance i have been reading both Thinking fast and slow, (Kahneman) and AntiFragile (Taleb) at the same time. It interesting what you get from reading books together like this.... Anyways.... there is the halo effect - "The halo effect or halo error is a cognitive bias in which one's judgments of a person’s character can be influenced by one's overall impression of him or her" but i think this refers more to the judgement by people on others....is there a self halo effect, or is it simply the normal optimistic view we have that ignores the realities of life and elevates ourselves above our real capabilities? IMHO I think this is usually when trading hits home the most for many folks - the brutal honesty of it. They either face it, learn and move on, or deny, deny, deny..... or do you think that there is more to it than that? ............. slightly similar.... I am also renovating at present and its amazing how even in the building game and the fact that no matter what people think, things take longer, cost more and will reveal hidden problems. Shaking my head at the builders optimism - I am winning bets with him as I am simply being pessimistic abut his time frames.

FWIW - I also agree with Sun trader and Zdo, but I think you are also doing the right thing for you at present. You need to get comfortable and be able to make a decision which strategy to follow or have tactics to know when to push, and the belief/knowledge/trust that your system will produce enough opportunity every month is a good thing as it allows you patience. Hindsight is a wonderful thing, and I can equally imagine you writing another thread where the opposite occurred - ie; you wanted to push and let things run and yet they all reversed, what then would the mindset and advice be??? This profession is a continual trade off, work out the trade off and then stop meddling. Dont sit and just question what if (if you are getting nervous about pulling the trigger this sounds like what is happening) - design what you would have done differently, how you might profit more next time, what scenarios might have occurred especially while its fresh in your mind, how to keep going and not sitting on the past trades. This will be a very handy reference when you choose to push trades next time or not. We delude ourselves and referencing past ideas to put things in perspective is a pretty humbling tool. This is the opportunity to do this, not when the moment has passed.

This information would be hard to come by and limited in its accuracy and scope. Its certainly possible to get, but often this would be recorded in minutes to meetings, off market share placements, pre-IPO capital raisings etc and this is then subject to shareholder agreements and valuation clauses. You would also have to know the number of shares on issue to even get a relevant comparison to an exchange listing. eg; Original shareholders might issue themselves 100 shares at $1 each split 5 ways, first capital raise might be $1 for 1mil shares, then there might be subsequent capital raisings at $3, $5, $10 for different amounts. Other shareholders of the early VC variety might have different shareclasses, options, unpaid shares, rights or terms that kick in at various levels. It would be nice if things were easy! What/why are you looking for this information?

When the gold bulls are starting to compare against Warren Buffett you know there is something screwy going on. I am old enough to remember the last time Buffett was termed a dinosaur - the internet bubble - remember how that ended. - a closer look would reveal that gold has really only had its big outperformance in the last few years - which it should have done given the fear. - over the long term - lets say compared to when Berkshire started - what has been the comparable compounded returns? - this is an interesting comparison - Berkshire Hathaway vs. S&P 500 comparison (has gold returned the same for a $1 investment?) - if you want to compare arguably the greatest stock market investor to a single instrument, then I am sure there are better single stock returns that might be used to make gold look pretty ordinary. Point is - clutching at straws to reinforce an existing belief is still clutching at straws. (I am neither a fan nor a detractor of gold or Buffett - there is certainly a cult of following for both, but FFS when people compare the two - I would take Buffetts returns over golds any day - as we are constantly reminded that gold simply maintains its purchasing power - right ??? - of is it now the extra claim that gold actually should outperform this as well? Real wealth creation v speculation or maintaining capital. .... weekend rant! )

for those so inclined..... Search - Google/Bing/IE - for 'friends of Irony images' A good laugh to be had.

Church Ladies With Typewriters \They're Back! Those wonderful Church Bulletins! Thank God for church ladies with typewriters. These sentences actually appeared in church bulletins or were announced in church services: The Fasting & Prayer Conference includes meals. -------------------------- The sermon this morning: 'Jesus Walks on the Water.'The sermon tonight:'Searching for Jesus.' -------------------------- Ladies, don't forget the rummage sale. It's a chance to get rid of those things not worth keeping around the house. Bring your husbands. -------------------------- Don't let worry kill you off - let the Church help. -------------------------- Miss Charlene Mason sang 'I will not pass this way again,' giving obvious pleasure to the congregation. -------------------------- For those of you who have children and don't know it, we have a nursery downstairs. -------------------------- Next Thursday there will be try-outs for the choir. They need all the help they can get. -------------------------- Irving Benson and Jessie Carter were married on October 24 in the church. So ends a friendship that began in their school days. -------------------------- A bean supper will be held on Tuesday evening in the church hall. Music will follow.. -------------------------- At the evening service tonight, the sermon topic will be 'What Is Hell?' Come early and listen to our choir practice. -------------------------- Eight new choir robes are currently needed due to the addition of several new members and to the deterioration of some older ones. -------------------------- Scouts are saving aluminium cans, bottles and other items to be recycled. Proceeds will be used to cripple children. -------------------------- Please place your donation in the envelope along with the deceased person you want remembered.. -------------------------- The church will host an evening of fine dining, super entertainment and gracious hostility. -------------------------- Pot-luck supper Sunday at 5:00 PM - prayer and medication to follow. -------------------------- The ladies of the Church have cast off clothing of every kind. They may be seen in the basement on Friday afternoon. -------------------------- This evening at 7 PM there will be a hymn singing in the park across from the Church. Bring a blanket and come prepared to sin. -------------------------- The pastor would appreciate it if the ladies of the Congregation would lend him their electric girdles for the pancake breakfast next Sunday. -------------------------- Low Self Esteem Support Group will meet Thursday at 7 PM . Please use the back door. -------------------------- The eighth-graders will be presenting Shakespeare's Hamlet in the Church basement Friday at 7 PM .. The congregation is invited to attend this tragedy. -------------------------- Weight Watchers will meet at 7 PM at the First Presbyterian Church. Please use large double door at the side entrance. -------------------------- The Associate Minister unveiled the church's new campaign slogan last Sunday: 'I Upped My Pledge - Up Yours.

It sounds like you are really reinforcing an aspect of that old saying - "only trade with money you can afford to lose." It happens when other motivations influence the mind as well. Which is why I think the idea of a set strategy, set of rules, mandate etc is important. Prop traders will alter their behaviour if they are paid a percentage of their income in much the same way if there are caps, time limits etc. When bonus structures change their mindset it will be the same result. They will hollow log, fudge numbers, deny, or sit on their hands pretending to be busy. Hedge fund managers even have similar issues - a small up months every month are more highly rewarded by investors than big wins and extra PL volatility - even if on a risk reward basis one way makes more money and has a better risk reward profile....it still affects the mindset. In all sorts of ways these affect people with various amounts of money or motivations. So dont feel like you are alone in this. You need to know and understand - and either incorporate feelings into the strategy methodically or ignore them.....a half half approach probably wont work IMHO. Another trick is to look only at % - it standardizes the amounts. If you are thinking in terms of - this trade cost/made me a nice dinner/car/holiday/house then you will always mind f..k yourself. If you think in % you will be able to say, normally this type of trade makes x%, we are now at X+y% which normallysays I should lighten off its easier to quantify. (War story fade in fade out. I was sitting at a desk when two guys running a very dodgy fund - they had no real strategy and were essentially salesmen. They were discussing what to do. They had 4 macro positions on that all went their way in one day they made 7% over about 2 days when their yearly target was only about 12% and they did not know what to do......I pointed out the obvious above simple maths, and then added - you can always put the trades back on the next day/week/month, but you should lock it in as that is your job/aim/mandate.....after another 30mins discussion they exited their positions. The next day it all reversed, they would have lost half the gains....they were busy patting themselves on the back about how smart they were...:doh: --- their fund is now down about 30% over the last 4 years. To anyone watching what they were doing as an outsider it seemed obvious, but they were blinded by the lights like the bunnies/muppets they were (I have a history with these f,,,wits)) but I am sure you get the point.)

Even if you dont need to book the income - the issue will remain - which is why you need to work out a trick/method (?) to get around this. Kuokam has a point, but that is exactly it - if you get out and cant get back in, there are probably other issues. Once again it goes back to strategy and sticking to it - whatever it is. Everything in trading is easier said than done, so do more of the the things that work and are easy, and less of the things that are hard and dont work.

for clarity.....no...... Bob - in quoting Ron Burgundy anchorman to Tits Macgee - " you have a dirty whorish mouth" (guess whats on the TV in the background?) I said sell the rallies.....agreeing with Patucca extraordinary as it might seem! If it breaks up (1350 seems a reasonable level) then the strategy is likely to change to start looking at buying dips.....you are just faster than I in changing the strategy if you are buying the dips already. enjoy -

see my post number 9 - i dont use oec, or program in it. try their site.

make of it what you will as it is completely subjective...... What you have is not unusual.....and is at the core of one of the great trade offs in trading. The trade off between taking profits and letting them run and compound. The aim for consistency v capturing those extra profits if they appear. (even hedge fund types have this dilemma - the trade off between steady positive but small returns v setting the world on fire) and when doing it as a portfolio of different stocks you were influencing one set of trades over another thinking it makes a difference, leaning on a trade based on what happened elsewhere......dangerous. IMHO....If you need to actually get income from it and you are being focused with the ability to get back on, with little worry, and good entries etc....then stick to that. Dont start thinking 'could of, should of would of' - it will likely stuff up what you are doing well. Dont lean on one trade based on previous different trading decisions and outcomes. You reached the best conclusion when wavering - exit - as you can always get back in. If you wish to let things run, then treat it as a separate strategy, separate account, separate pool of money - i was never able to chop and change between the two strategies at will in the same accounts - exactly because of the flip flopping you are having. (I have also only seen one person do it well, but he had a big account, lots of stocks and arguably some inside info where he really made his money - whoops I mean enhanced information flow. While other traders I know who require the income find they trade best when they just keep chipping away at taking profits and they best spend their time waiting for opportunities. They have the same issue, but find various solutions ) Combining Long term and short term in the same accounts will probably also lead you to self deception in records and mindset - Only by separation can you accurately measure what works for you , what feels comfortable, what you want to actually do, and which is likely most profitable. You might need to build enough of an account for this....but if the short term trading is good - leverage it a bit more for extra kick???? You need to find a trick/a measure to work out when out are flip flopping and a solution - exit, separate accounts, more leverage and reward the extra PL by using a different strategy - or you will likely hurt what you do well rather than improve what you do badly.

first and foremost the pressure on a retail trader v an employed prop trader (or an unconstrained prop trader ) v a fund manager with a mandate is very different. So each will have different pressures, even though their responses to actual positions may be similar, I think you will find the pressure from the outcome of a trade v the pressures and motivations for implementing that trade will provide different results. The pressure for a portfolio manager meeting a mandate is infuriating often as they always talk about tracking error, under or over performance, beta and alpha and often give scant regards to actually making money. There is also the added pressure of marketing.....and a lot of this type of job role is marketing and sales. Prop traders might have manager pressures - or the feeling they need to do something pressures, where as the retail trader really only has his own pressure and this is largely dependent on expectations and ability to survive. All this makes a one stop shop/solution impossible to compare IMHO. One reason why i thought these apps - tailored to the individual make sense. ................. I would think that maybe a survey of the clients for where their pressure - or assumed pressure comes from might tell you more. A review and feedback to reveal why lies below the surface might be the best approach. My wife is a PM and we stopped talking/arguing about this as its a different mindset, and while i get frustrated as i am more price orientated and absolute return focused, she is more fundamental and relative focused. (all talk about getting in the top percentile of comparable managers etc) Often many of these managers dont know what a buy or sell button is or care much after their analysis and how it tracks in their portfolio of 20-60 stocks. (I am being a little harsh and cheeky but internal corporate politics or keeping AUM is a bigger pressure on any fund managers I know.) As your focus is on a particular area once that area is targeted as a problem than you could certainly add more insight. You might need more info from CLSA otherwise a generic forum workshop might get discussions happening whereby pressure is relieved not from the trading but from operational procedures, or you ideally generate business from both types. Hope this helps.

the difference between strategy and tactics! I am not ignoring a possible breakout, I think given the trend is down (though for some this is debatable) I would think that any breakout is one that might provide ample opportunity to fail - if its more sustainable then I would be more inclined to think the down trend is ended, and would then look to buy dips.....you are just faster than I am.

Patucca - most are not negative gold, they are negative one eyed biases. Perpetual bulls and perpetual bears are the same, so your "this time" will probably be right at some stage....but given i take your other advice of not listening to you and doing the opposite I will stick to that. Looking at it - a good rally will be a selling opportunity, but a good rally will also be an alert that buying dips might be the next best option. Nothing fancy. ................ Bob - 'them' - the children Bob, the children,..... think of the little children,

I would not view these as crutches - they are like the video you used for your subject. A tool to help people view themselves. Some might argue a pencil and paper makes our minds lazy I would imagine that even if some relied on it then its better than the alternative. The TV program actually revealed a couple of interesting points as well. 1....the numbers dont lie. We might lie to ourselves about how we feel, but the body was often saying something else. This I would imagine help self awareness. In one example the sports doctors were able to pick up injuries and sickness before the players did. 2...the numbers gave people a focus and a goal, and their spirit of competition meant they were more likely to take note of their results. 3...the importance of this being tailor made to the individual as not everyone is the same. I think its the real time monitoring that makes the difference. Not an occasional weigh in, or heart rate measure, or blood test. I would think these could certainly be of use in high stress occupations - combined with techniques to reduce/calm the responses. You might have a new business venture Rande, well worth pursuing.

Hi Rande, I was just watching an interesting program showing all the new apps around for smart phones etc that allowed people to self monitor for their health. Things like heart rate, steps per day, how they sleep. Even the ipad can read your breathing and heart rate from looking at you in a video. etc. Fascinating futuristic ideas about how we can more tailor make our health monitoring. I was wondering if you were aware of apps similar designed for trading? (I assume the medical ones would be a start) maybe there is a market for apps.

nahh.....give them all a gun and a bar of gold. Then see what happens.

another risk to the strategy story...... One time I went on holiday and I was leaving positions with my then business partner to manage - he also traded the same way and we shared offices etc. I expected on particular stock to have a good move coming up - not sure in which direction but that wedge, triangle whoo haa never developed and instead became a really tight crappy congestion. My instructions where to do nothing, dont trade the gamma - I was away for three weeks I expected to come back and see a big move int he stock and that he would not have hedged for me and I was going to make plenty....:doh: Three weeks later, the first thing he says when I walked into the room 'The bad news is the stock did nothing, the good news is you were not here to watch the agony of it doing nothing every day.' The range was so tight even if i asked him to trade the gamma it would have been useless and probably only covered 10-20% of the time decay......the implied volatilities had fallen, no one was buying options, it was death by a thousand cuts. So he was right - if I was there, it would have been miserable. What did I do - I steeled myself this was going to be a horrible end to the month, unless the impending move I had hoped for was going to occur. So I mentally wrote it all off and thought if I could get back to some sort of BE I was going to be happy. At this stage there was approximately 3 weeks until expiry. With about ten days to go - the move occurred, and it was so slow it was even more agony wondering if I should have been now trading the gamma - but I did not - I let the deltas run. (This at the time was the hard part - not to meddle with my plan) I got out of jail and once back to BE I hedged everything. I hated that month and count it as lucky to have not been my worst month ever by a long shot. The funny thing was - if I had let the deltas run for the last 3-4 days into the actual expiry day it would have been a great month for the PL as the move then accelerated. So the reminder that it can all go horribly wrong trading this way still needs to be at the front of your mind, and what are you going to do about it when it does, and while it would have been good to win - for me it was about keeping in the game mentally - so taking the book down and hedging once back to BE as part of the game plan was good enough. It is not all happy sailing and it can be death by a thousand cuts and luck plays a big part. At least when you are short options, the pain is often quick, but when short and in pain, there is usually no exit as the market is in pain as well and you never know how much you can loose, whereas I had the ability to understand it and mentally accept it and plan for it.

One of my best months trading in one particular stock was being short a lot of options - it was also my most nerve racking, and as I understood the risks.....but the reality hits home when you have good months when trading long vol - particularly when concentrated in a few select positions or stocks....very hard to beat those months (as opposed to a more short vol portfolio approach) (Dont forget this was also multiple strikes and series, and I also dont necessarily think that buying options is the only way to go.) For me the only thing I remind my self when shorting options is this - the most you will make out of them is on the day you sell them, and the one piece of advice for those who sell is that you should always buy back those short options from people once you have made most of your money - just because its theoretically worth zero does not mean the risk has gone. That only goes when they expire. Did you have them churning short options, or simply churning - plus in the 80s commissions would have absolutely killed them! Tell more please - I like these types of stories.

Not being overly concerned with the ideas of fate, belief and gods etc....so I will skip all that, but in terms of a benchmark.... I called it a theoretical benchmark because in this unique case of flipping a coin there is no official benchmark. Whereas if comparing our results to some other index - the usual measure then there is an official benchmark (with its rules and composition) to index against. When it comes to coin tossing, all we have is the mathematical expectation over the long run. Otherwise, the benchmark would either be us....or anyone who flips a coin which would be rather pointless. Even if we combined lots of different coin flippers to create a benchmark, then it should approximate to the theoretical benchmark over the long term. This must surely be the idea that over the long term flipping a coin will provide no predictive edge, and hence why this is purely an experiment in tricking ourselves that it might, and hence why we can market this at a later date as a system with rules in the hope we can trick (ahem....convince) others that it works. (Now if we introduced some money management and other forms of controls or filters we might actually have something.

you can predict fate - you supposedly cant change it. Mitts - as for a benchmark, its a theoretical benchmark based on what we would 'expect' (as in all probability) to occur. and Zdo,,,,drum roll please...

The longer the expiry date is away, then the higher likelihood of the underlying moving far enough away from the strike.....its not so much the time to getting a free option. Its just that when they occur, you should keep them and then make the most of them when they occur. You ideally should have a rationale for buying and selling in the first place, and in your normal rehedging sometimes the end result is that you get a free option. eg; lets say you buy a call in an instrument that is trending up, hedge it well, trade around the gamma etc - pay for the time decay - odds are you might not have made any money, but if the instrument has trended up still, you might now be fully hedged and have an OTM put. Often people will unwind or sell out the options. I would prefer to keep them. If you get one within 2 weeks its probably through luck....and then making the most of that opportunity. ......war story fade out..... Asian financial crisis Oct 1997. (my exact memory of the details here are fuzzy but the ideas are the same) It happened a few days before expiry, so most options had very little time decay. A stock I was trading opened down with the market crashing - everyone was worried about their downside risk. I assumed if this stock was already down 25% the risk was on the upside. The stock was around $19.20 and everyone was wanting to buy the 18.00 puts (fear!) I was actually short the $20 puts and long the 17.50 puts, so I bought the 20 puts, and sold the 1800 puts. I bought a put spread. But I was not bearish I just wanted to get my short options back and was willing to purchase the stock outright if it fell another 10%. To hedge this as I was not short I bought the underlying stock, and as luck would have it I managed to not only buy my shorts back, but bought more of the $20 strike....all for parity for where I could buy my stock. ie; if the stock was at 19.20 I purchased the 20-18 put spread for 80 cents and bought stock at 19.20 to hedge. As the deltas of the 20 puts were 1, the 18 puts was 0 --- it was a few days before expiry. I ended up completely hedging the 20 strike. Guess what happened - that afternoon the market for the stock was about 19.80, and the next day or two the stock rallied again - I think it closed about 20.80. I let it run because I viewed it as a freebie. Point was I managed to get a very good risk reward trade on - not quite a freebie but close enough in my book - it made good money, purely because I thought in those terms. So yes you can get them - but its incredibly rare. (remind me if I forget I will tell another way to get cheap options on some rare events in another post) .................. Over the years there have been plenty of market corrections either through disasters/black swans or through just normal market corrections, stock profit warnings or similar. If you look at my examples they dont necessarily move that much, and in % terms its relatively normal events. ............. People might say - why not just buy OTM puts occasionally. That would be ideal - if your timing is right. Remember this is not about picking direction or timing, its about ending up with them as a result of the gamma trading. Point is - its an opportunity that you have to make the most of when they occur. (and unlike what some risk managers believe, these 6 standard deviation results that occur only ever 100 years seem to occur more often than that)

after Mitt - count my random coin flip - tails

A feel good trade. Trading gamma does have its risks...it also has some potentially big rewards. This in my opinion is the key to success - real success when trading long volatility. This in my parlance is the ability to end up with 'free options'. "Froptions" ....................... What is a free option It is an option that effectively has no time decay (or a very small amount left on it) because either the underlying has moved far enough away from the strike, but it still has time till expiry. These can be OTM - because the underlying has moved away from the strike and there is nothing to hedge These can be ITM and the deltas are fully hedged, effectively giving you the synthetic option (ie; a call at delta 1 (ITM) that is hedged with a short underlying = OTM put at the same strike) How do you make your money out of these? Ideally, you would have already covered the cost of them - by trading the gamma, or if not you were not too badly hurt. The money is made when there is a big move - the black swan event - or even if there is enough time, a trend starts to occur, and you are able to let the options run. How much time until expiry is good? Obviously the more the better, but it does not matter - big moves can occur any time, even on the day of an expiry. Whats the key to it? Simple - dont sell them out if you get them..... and if something starts running your way, the default in this case is not to hedge. The reason is it cost you nothing, and if you are not careful your rehedging may in fact cost you again. However - dont look a gift horse in the mouth and at some stage the freebee profit should be taken. Why this is hard to do? Like most things in trading the temptation to take profits, or in this case to sell something for a few cents that is theoretically worth nothing is high. Too often traders sell their free options out too cheaply, and in doing so they miss the opportunity to make big money. (Now people will argue that you are better off taking profits, etc etc.....but I am talking about opportunity cost v taking a few cents here and there, especially when you have a position that will cost you nothing to hold) There is a margin cost to holding these. You will have to fund the position if it is long puts, long stock or even if its long calls, short stock. (which is why having OTM options for free is a nicer result) However, this margin cost is small, offsets from portfolio margining through a good broker should be had, and again it really helps to have a larger account than many retail traders have. ...................... War story fade in and out..... I have attached two examples - they are a presentation I did with some others to show examples of such trading. These were actual trades and entry levels. We also showed example of where we hedged too early, and even some examples whereby we got it wrong and this cost us money - the first example is hedged early as it was on expiry day and rolling the options in this case was deemed too expensive......but the point is this is where we made good money trading this way. (these are stocks in Australia) The first example is a true free option when fully hedged, the second shows how we actually got the direction wrong and were long deltas coming into the move, but how the resulting long volatility and change in deltas from the gamma ended giving us a short position with the big gap down and we made money (in this case it was a very good day as the position was quite large - I do remember reading the news and cursing and swearing that we were on the wrong side, and that it would probably only fall enough to cost us money and then not much more....its good to be wrong sometimes!)