I have been a professional trader the past 20 years, working in some of the largest global banks and one of the major US IB. My experience is mostly in FX and Interest rate derivatives, and mostly in emerging markets. I have had very little exposure to the equity markets, other than as macro factor(Always had my money passively managed). I have been on a COVID induced sabbatical from the financial industry since early this year. At the end of July, and after binging on everything on Netflix, Amazon and HBO I decided to dip my toes in trading equity/equity options. I will share some of my experiences and results. Opened a trading account with a low 6 figure balance to trade cash equities/ETF and level III options. From the start I decided I was going to pursue a more contrarian strategy. My idea was to generate positive returns with strategies that would offset negative periods in my non-discretionary passive goal oriented accounts. The focus was to be weekly, bi/weekly and monthly positions. So, swing trading rather than intraday stuff. I always believe that markets provide BIG opportunities 3-4 times a year were one can size up. This last point would be the second leg of my strategy. Since my strengths lie in global macro trends, I have stayed away from individual stocks, except for those who provide a theme. i.e. Financials, Oil to name a couple. If I choose an individual stocks I tend to look for blue chip names were the probability of an ENRON moment is much lower. So in financials I would choose a JPM for example. Mostly I trade the $SPX, since it is cash settled and SPY and QQQ in lesser volumes. 90% of my positions are in options, and 70% of those have been in limited loss strategies, call spreads, put spreads, Iron Condors etc. 25% in outright long options(this is were the big money is made in my humble opinion. The remainder in naked options in small sizes. 10% overall in cash equities and ETF;s. I started rather shaky as I came to grasp with the volatility of the equity markets. I was lucky that I had mostly winning trades in short S&P call spreads, as I had some pretty big swing in p/l early on. I realized quickly that my positions were too large. Had a couple of 8% swings to the down side, but never broke my drawdown limit and all of them reversed the next day. After those initial scares I reduced size in my short options strategies and increased size on my long options positions, and things improved dramatically. Since those early days in August and early Sep, the performance has improved dramatically and I have achieved my goal. I have beat the S& P 500 with less volatility and with a negative Beta. As of Dec 18, 2020, using daily log returns. Start 28 Jul, 2020 Sharpe Ratio : 1.8296046791489862 Sortino Ratio : 2.206217845864511 Info Ratio : 68.64% Beta : -0.17712463144203955 Alpha : 0.9123384290783765 Portfolio Return Annually Compounded : 84.12% (27% in absolute terms) Benchmark Return Annually Compounded : 40.69% Portfolio Benchmark: SPY Risk Free Rate Annual : 0.08% Calendar Days : 143 Observations: 104 Too early to tell if I can replicate this consistently or if I can scale up. Have yet to have a real punch in the mouth, although I am very disciplined in keeping 2:1, 3:1 p/l ratios. Also macro themes, or market themes have been easier to see. For example, the recovery in Bank stocks was a big theme for me and the gains from that position will be hard to duplicate moving forward. All in all, I expect to be back to work q1 2021 and thus will have to close my options account, but until then I will try to keep learning this markets and making the best of the situation. Regards, Bomp
There are not that many opportunities with a high enough expected payoff to warrant having an outright position. Perhaps there are but I do not have the resources or the knowledge to recognize them. I stick to indices and a handful of stocks I can follow(or have a macro/micro theme I can grasp). For example I though Amazon was going to stay on a tight range with a small bias lower. Their status as a big winner of the CONVID crisis is mostly priced in my view, but there is no reason the stock to move considerably lower. Clearly the strategy here is not to an outright position. Sold and Iron Condor and with the first leg lower I rolled the topside strike lower. Position expires in 2 days. On FB on the other hand I found a theme, and it is a theme I will look to position throughout the next six months. I liked it lower after the news of the anti trust suit(plus other stuff) and put on a long risk reversal(sort of, short side protected). I learned a lot from this position as this stock clearly trades with large institutional flows. Some nasty squeezes the past 2 weeks. I was fortunate enough to keep roiling my strike lower and pocketing parts of the move. Closed today when spot reached 269/270. Overall I trade very few times a week, mostly maximizing winners, minimizing losers. I do not think I could 'beat' the market going in and out everyday and being 100% risk invested all the time.
Because he's not an asshole like me, which believe in that sort of thing. He actually hedged to limit his risk!
You should pack it in..A 4 to 1 Like to Post ratio is unheard of Im in a similar position to you,except I am a voluntarily retired derivative guy who got back into it out of sheer boredom.. Biggest challenge going foward is to morph into a position trader and cut down on screen time so I can GTFO of the house and Ski....
Or automate multiple capacity constrained strategies. Works fine for <1mil$ account. Check daily if executions are matching your model after market close when done with Skiing.
hmmmmmmmmmmmmm risk? you mean what i have been doing for decades is risky? ok i think i will leave trading now....
i used to be that and be on the golf course all the time but i got fed up of going to sleep with fear of what the next day will bring when 9/11 hit i was in market...everything fell 50-80% but my portfolio fell 1%. but even then i got into day trading ..........so that i could sleep well at night it took me 13 years to become a master at day trading so there are always many angles to anything
Bomp; what are the triggers for big FX players to take a position? Were you looking or using: Client orders; larger TF's; no charts only orderflow; trading the spread...? And do you think that this market is heavily manipulated? Thanks!