At my work, we trade primarily eurodollar future spreads which means for everything we buy, we sell something against it. We are always hedged. Pretty much the whole company is split into groups of 2 or 3 with a leader of the group (day shift trader) who primarily makes decisions about portfolio strategies and pays themselves, and the one or two other people in the group who manage the portfolio (European and Asian shifts). So anyway, to the story. Starting with the huge drop in the S&P on monday, my boss developed a keen interest in trading the S&P future. Now, she wasn't just trading 3-5 lots max; she was trading 5 lots adding to 45-50 max. I watched her do this as she made tens of thousands of dollars in the matter of a few hours. As interesting as this profit was, I knew that the risk involved may not be worth it based on her discipline. So, I asked her, "where is your stop loss?" and she responded speechless. This is when I realized she did not have enough discipline to trade the S&P future. So, the other teammate we work with and I had discussed her actions and both agreed that this trade was too risky for any of us and we both felt scared by the risk she was taking. On Tuesday, we both at separate times expressed that we were uncomfortable with her new interest. I told her, "I don't want to come in one day and see you down 100k from a bad trade". I'm not sure what my boss told my other teammate, but she assured me that she was "also scared when she had 45 lots on" and she would, "From now on only put on 15 lots max." and put a stop loss at the amount she made from it. I foolishly believed her, but I've been trading with her for about 4 months now and know her styles. I should have put my foot down. On Wednesday, my darkest fears came true like a prophecy. Around noon, in the middle of my economics class (I'm still in college. bleh), my teammate called me (He was just casually checking our positions online) and told me my boss was currently short 100 S&P's and the S&P was rallying pretty strongly. I was a bit fearful, but assured him that the online positions must be wrong as they were wrong the day before and perhaps they had not been fixed correctly. I knew this wasn't the truth and even if it was incorrect, it wasn't incorrect by 100 lots. I sat through the rest of my class sweating out knowing what I would find when I walked into work only an hour later. Sure enough, as I walked in, my boss embarrassed, asked me to walk away for about an hour and come back (She's never asked me to do that. Even on a day she lost 70k). I took this hour to call my teammate and confirm that both of our fears were definitely true. While he was on the phone with me he was still keeping a close track to the positions from online and told me she had just bought 600 Ten Year note futures while still short 100 S&P's. For those of you who don't know, this is the total opposite of hedging despite her buying something against a short. She had pretty much double downed on this losing trade. She finally called me over and took me outside in the freezing cold to tell me she lost money, a lot of money. I was so pissed at this time because she didn't know that I already knew that what we had said only the day before had happened. I just didn't know the magnitude. All she kept telling me was she lost a lot of money. I refused to respond at all to anything she said. Then a few co-workers came over and she was telling us all what happened and finally spit out the figure she had lost: $625,000. I immediately walked away to walk around the block, so that I didn't do anything i would have regretted. This was the money we had worked 4 months on to earn. This was the money that paid our salaries. It's been 3 days and I'm still getting pissed every couple of hours. I'm not sure if I'm more mad at her or more mad at myself for not being a little more persuasive in my warnings. I just needed somewhere to write this down. Man... I am so pissed off.
I gotta ask. What kind of an institution runs a Mickey Mouse operation like this? I'm not sure how it sounds to some, but that story leaves me wondering just who in the world is supporting these operations with capital? No offense to thread starter, you actually sound like you have your head on straight.
$625,000 shouldn't be that much money to them, but I won't be surprised to hear it costs her job. You don't need to be angry unless they give you some story that *YOU* won't be getting *YOUR* paycheck as a result, in which case, you can honestly say you'd heard about it when it was 1/2 the size before, and questioned it. That should be more than they'd expect of a lower level employee still in school. She is the boss. If she screwed up its not your fault and you shouldn't be held to account for it. The lesson to be learned here is that its best to trade with your own capital for your own profit as soon as you are capable. At least that way you control the risk and reap the rewards. Learn your lessons, as many as possible from the mistakes of others like this, if you can. Its a lot cheaper than making those mistakes with your own money. LOL, ask me how I know. At least you seem to be getting some paid training, even if sometimes its seeing a big goof, rather that just jumping in and making those goofs with your own money like I did.
From your post, there seems to be some question about whether your compensation is tied to the performance of your 'cell' or group. Seems like maybe you know for sure that your salary or paycheque will be affected? Is this the case? If so, I'm sorry to hear about it. Most people, if they saw their boss make a mistake that cost the company money, would not be 'getting pissed every couple of hours' 3 days later, as long as they knew that they bore no responsibility for it and it wouldn't affect their job.
This is a story of people trading who don't really know what they are doing.They have lucky dogshit & unlucky dogshit and sadly thats about it. Read this, more than once, if necessary. If you are applying an accurate methodology you stay in play in an index futures market where you ride the upswings and downswings as they follow each other, so that any postion you have which becomes a losing sector, then the next signal AUTOMATICALLY turns you around and limits any loss to a very minor level. Whatever loss sectors are taken in the day, you still accumulate daily a substantial net profit Open to EOD. The weeks of heightened volatility to date in index futures are simply huge money making scenerios for the few professionals who do know what they are doing.
Well, on the bright side, there will be a spot opening up so maybe you'll be getting a promotion soon. Seriously, I don't know what prop firm you work at, I have some pretty good guesses, but that's a pretty piss poor risk management system they have in place. It sounds like your at a shop that pays you bonuses out of your team's account. Sucks for you.
What you don't mention is her track record before this loss. It's no excuse for poor risk management but quite a few traders were caught by surprise last week. Getting pissed off every couple of hours isn't going to help, losses happen so grow up and deal with it, the money has gone and there's nothing you can do about that now. A better approach might be to act like the team you're supposed to be and support each other instead of moaning behind each others backs with a self-satisfied hindsighted 'I told you so', she's probably feeling like shit anyway especially if her loss has affected other team members paychecks. You also run the risk of putting her under pressure and in the unenviable position of trying to recover those losses quickly to get back in her fellow team mates good books, that's bollox, you're supposed to be a team. Be constructive, supportive, and diplomatic. Try asking her what exactly went wrong, how you can all learn from the mistakes, and what you're all going to do to prevent it repeating itself.