Nothing Matters

July 15th, 2016|Basics|

When considering a trade, most people just think about how much a trade will make when they are right, and how much they will make when they are wrong. But those should not be the only considerations. There is also the scenario where “nothing” happens. All else being equal, you want to also make money if the market just “sits” there (via carry and/or roll). The longer the time horizon on your trades, the more important the carry and roll become. Think about “nothing” more often - it happens A LOT more than you think. So when you go through [...]

Book Review: The Next Perfect Trade by Alex Gurevich

June 14th, 2016|Basics, Featured|

I’ll give it 5 stars (out of 5). I’ve referred to Alex a few times in the Forums, but not by name.  He is the former colleague who regularly had $100+ million P&Ls.  I did not realize that he wrote a book late last year.  As soon as I found out, I ordered it on Amazon. Let me give you a little background.  Even though we traded on the same desk and we both did many more trades than the average trader, I would say that the overlap was almost non-existent on the types of trades he did and the [...]

Trade Implementation

June 7th, 2016|Basics, Featured|

Traders spend a majority of their time thinking about their view.  Think about ALL the cumulative manpower and brainpower involved in the analysis of markets and most of it focuses on “up” or “down.”  Traders don’t spend nearly as much time thinking about the implementation of that view.  It would be one thing if people were right more than 60% of the time, but it’s typically not if you compare the results to a relevant benchmark. If you are only going to be right 55-60% of the time (at best for the vast majority of traders), then the expression of [...]

Top 5 Reasons to Trade Curvature

May 31st, 2016|Basics, Featured|

I trade direction and slope.  But what I really enjoy is trading curvature (for example, butterflies), for a number of reasons:   1) “Concavity.”  This is a term I made up - it has some similarities to “convexity.”  Look at the 4 year scatter plot of an equal-weighted ED13-17-21 fly on the right (blues on X axis).  Note that I exaggerated the close for illustration purposes.  Generally, the possible outcomes for a butterfly and a given rate, will not be a linear relationship.  History will bear this out, but more importantly, it is so by construction (I may discuss in [...]

Draw Me a Picture

May 25th, 2016|Basics, Featured|

If you asked someone to draw you a picture, and they drew this picture, what would your thoughts be?  Just say what you would really think... Exactly! So I can not for the life of me figure out why 90+% of the trading population is fixated on “up” or “down.”  Trading does not have to be about only one dimension.  Making “up” or “down” calls is something you can train your pet chicken to do in your spare time.  Considering how many active fund managers can’t beat their index, you could probably get a chicken to perform okay.  Even the [...]

When Zero Is Not Zero

February 15th, 2016|Basics|

The news outlets typically report that the odds of a hike in June are about zero.  It’s NOT zero.  When is “zero” not zero?  The pricing of any Fed meeting is a function of: The odds of a hike in rates[1] The odds of an ease in rates The odds of unchanged rates, and The odds of FF effectives being different than currently. For simplicity, let’s ignore 4.  So when you look at the various scenarios {hike, ease, unchanged}, each scenario is non-zero.  When you see “zero probability of a move”, it’s more accurate to say that the odds of [...]