I read someone stating that synthetics make him avoid the lockups/downs things. I assume you know about synthetic (a fancy word for: Long Fut/Stock = Long Call + Short Put.)
I also have a very good impression of him. He strikes me as a sharp, wise, well read, and experienced person (and helpful/gentleman too).
I have a feeling that you may have had extensive experience outside the market such as in business/investing. You know the saying that common sense is not common.
Are you kidding me? You think you can outsmart the commodity market that way? The hedgers, what we call the commercials or simply the insiders, are ALWAYS light-years ahead of the average commodity trader! Hershey for example, the famous chocolate maker, has full time employees just watching the cocoa beans all day in Ghana and the Ivory Coast and reporting back to headquarters. For example, if an employee spots a cocoa killing fungus that could potentially destroy the entire crop, Hershey (or Nestle, Mars, etc...) will immediately act on this extremely valuable and confidential information long before you and I hear about it, pushing the price of the already volatile cocoa futures contract at extreme levels in a heartbeat. By the time the small fries like us hear about it, it's already too late, your account has already been hit with margin calls left and right.
do you read what you write? better yet, do you even bother to read and understand what others write? and there you go making assumptions... you use softs as an example... and i cant comment on that because the only thing i know about softs comes from a buddy who makes markets on those options... and to be honest, i dont want to understand them, they are not as liquid, so i stay away... but let's just ask some common sense questions, and i will pick ZC, since i focus on grains... - what has been the frequency of limit days over the past 36+ months for corn? - when did they took place? around USDA reports? some other news? which crop? was there a sentiment about the market from most analysts one way or another? - how long was that market locked? what was the range for the overall duration of the limit days, in terms of pct? what was the overall drop when no longer limit basically... - assuming the front month was limit, what other months were impacted? what was the behavior of other correlated markets? what was the premium on calls/puts like? how could one have hedge the position to limit the loss... now... once one has all those answers, one can formulate a plan to make sure that risk is minimized because one will know simple things like overall risk and hedge to help offset that risk in the event of the scenario playing out... for example.. Old Crop was limit down on 3/28 ... it dropped almost 40 points after the report... the spread dropped 10 points, and continued to trade despite July being limit down since Dec didn't go limit... if one was long the spread with no hedge(long strangle or straddle for example) before the report, then the lost was $500-$600 per spread, heck... let's say $1000... still, not mind blowing... to be honest if a $500 or $1000 loss per spread will kill your account, then clearly you are under capitalized and have no business trading spreads... now, I don't know what makes you think i stated that one can "outsmart" the market, specially given the resources of commercials... and also given that i am more than familiar with what resources they have available to them... what I am saying is that one can protect oneself against bad things taking place by ensuring one's risk plan is adequate... if you can not understand that, then I can't certainly help you and our discussion is over as we are no longer having an intelligent conversation....
funny, a trading system of mine has evolved to use a combination of time stops and a disaster stop. its doing pretty good. how this imitates yours
they don't know what their ROI is. They are just prop traders. If they were any good, they'd be independent. But it was good while it lasted, wasn't it?
prop trader: I make a million dollars a year Independent trader: What is your ROI? prop trader: What's an ROI? and what the hell difference does it make? I make a million dollars a year!