[laugh] Ye gods and little fishes. One day, if and when I manage to understand three posts of yours in a row, I'm going to celebrate by getting riotously drunk. For now, I'm going to climb back into the rafters and chew on this for a while, quietly; a number of passes through it plus everything you wrote earlier have not made the finer details jell. I've already gotten something valuable from it, though, so anything else I get is an accelerated bonus.
What is there to chew on? His trade took 12 points of heat. With his fly, he only had a 1% heat draw on his money. You should see the drama of when I take over a thousand points of heat with no hedging. Those are the blue-ball days. Dest is still the man.
Overnight, you may have forgotten what your own early days of learning this stuff were like. Partly, you need to figure out what's important (because there's a flood of info, much of it total bullshit, most of the rest trying to get you to serve someone else's ends, what little is left subject to interpretation); partly, that you need to figure out how important the relative pieces are so you can approach them with the right attitude (i.e., a trade going 1% of your net liq into the red is just a fact to be dealt with, and probably not too uncommon. Which implies that there are standard tools - in this case, hedging - and that I must learn how to use them well, ASAP.) Watching Destriero do this matter-of-factly is giving me great feedback that aligns with what I'm learning elsewhere. But that's not the part needing the real skull sweat - although a little more clarity on some of the terms would be great. "Took 12 points of heat" - what is that, went 12 points ITM before he adjusted it by shorting stock? No, what's really important to me is visualizing that trade and figuring out the "whys" at different points as it progressed. OK, so he's long and it's going the wrong way. So he hedges it - and I'm going to assume he shorted the full size, not just the delta, because (as I've just learned by doing it) the latter would just lock in the loss - on the assumption that the move down should continue. Where is that assumption coming from? (If it's experience, well, I'll just have to defer that route to winning. If it's not... what is it and can I learn it?) That kind of walk-through is what I mean by chewing on it. And I'm putting a lot of effort into it because I'm still building the fundamentals, and screwing that up results in ugly long-term costs of all sorts. Watching a professional at work gives you all sorts of clues. I'd be curious to find out why you'd do that (I'm assuming it's voluntary...) I was just at a rather decent steakhouse last night, and watching their butcher cutting the meat - economy of motion, easy familiarity, nearly-automatic correct interaction with potentially dangerous machinery - was a pleasure. There's definitely some of that involved here, too. But whereas I'm not looking to be a butcher, this is something I'm fully committed to learning - so it's a lot more compelling. Plus a whole of fun... sorta like watching your favorite team hammer that ball into the goal. Go, Dest!
Long? I was never long the stock. I was never long delta in the name. It was my my second-largest short, ever. The largest being TSLA. The entry was 372 on the bear fly. Shares went to 384 if memory serves. 12 points. I was down something around 1-2% on net liq while holding the NFLX vol-position and it (short delta in NFLX) contributed roughly a third of my PNL for the quarter after having the shares drop 30%. Bear fly -> bear diagonal -> short shares from 354* -> converted short shares into bear fly neutral to 300 -> closed fly on touch of 300 -> shorted shares again at 293 average -> covered all yesterday, Flat NFLX. Regarding the fly conversion. I had a 250/300/350 synthetic long fly on from a credit and nearly pinned at expiration. So yeah, that was a home run. *Short shares from 354 -> shares drop -> short 2x the 300 puts -> shares drop -> buy 250P/350C strangle = long the bear fly via the synthetic. IOW I had the equivalent of the 250/300/350 long put fly on from a credit of 3.5.
@destriero, I haven't read the book in which you were featured. I assume you don't spell out your methods there. Or maybe it's a prerequisite to following your posts? I will take answer from anyone who read it. Thanks.
@destriero Hey, I recently read the chapter with your interview from "Traders of a New Era", where you mentioned that your father was a floor trader at CBOE when you were younger. Did you or your father know Mark Weinstein? I believe you've mentioned the Market Wizards books in one post or another so I'm sure you're familiar with his stories/claims. He said two traders on the CBOE floor organized (seemingly around the time your father was there) a trading competition he entered and won by turning $100,000 into $900,000 in three months with 100 percent winning trades (JS claims he saw the statements confirming it). He also claimed to have around a 99.9 percent win rate within the last couple years preceding the interview. I was wondering if you could shed any light on his trading and these claims if you or people you knew or your dad, knew him. "The reason I am sure is that I remember all my losses. For example, I have had three losing days in the last two years. Out of the thousands of trades I made during that time, I had 17 losers, but nine of them were because my quote machine was down, and when that happens I just get out of my position." - Mark Weinstein
My dad traded (mostly) IBM and spent most of his day upstairs. Dad knew MW and I remember the Weinstein bet. I know that the $900K was hit, but the spreads were fantastic and it was hard to lose money if you knew what you were doing. So I can't comment in the win-rate as TS was probably the only guy who vetted the win%. I traded on his JBO account for years but obviously that wasn't 100% legit. I knew a lot of the guys from hanging out with dad at the bars around 440 S. It's tough to lose long the fly if it's 6x8 market. The Weinstein story is legit. The best ROC I recall was a 22yo from UChicago who came into the SPX with $100K in borrowed money and left with $6MM the same year (to trade upstairs). I don't remember his badge. I should remember as I was at UC at the same time. The best story (schadenfreude) was hearing about the chaos the day that Najarian lost a couple mil in pharma/biotech in '91 via naked short vol(calls). God, what a dipshit. I was in the building that day, but was leaving for DC the following week. I was at RealTick when someone burst into the office looking for locals to help move the paper. It was priceless. The word was that Najarian actually shit himself as the smell was overwhelming. Mercury was so shady. Nobody could stand that crew.