Fair enough. I suppose that's where caution can pay off. Regardless of whether a trader is employing either basic or sophisticated analytical methods, he is still, as you noted, guessing. And I would think that where guessing and leverage go hand in hand, they are best tempered with caution. We all know that the key to trading is survival. If we can survive our mistakes, then we at least have a chance of prospering. I read somewhere that there are more skydiving accidents that result from experts taking aggressive risks than from novices running into trouble. (I don't know how the numbers relate proportionately.) This notion may well apply to our fallen Wizards. Perhaps they approached changing conditions a little too confidently or not at all. I realize that the dots can be connected in any manner of ways after the fact. I'm just putting it out there as a possibility. As I noted in an earlier post, I am certainly not dismissing your notion of randomness. I just think that there may also be other factors at play.
Correct, true arbitrage doesn't scale, it's simply too time-sensitive. One of Citadel's convert-arb guys told me last year that >50% of their gains are the result of distressed securities and macro bets. He drives a new Bentley, so I'll take him at his word.
Also, they took down half of Brian Hunter's book. Easy money, you say? Well, JPM took down the other half, and "someone" had been selling vols all week long rather indiscriminately. So over the weekend, CIG puts 2+2 together, takes half the book, and by the end of the week is out of about 75% of it. $1b. Thanks for playing. Just one example of the kind of decisions that get made when you're managing "big boy" money. It's essentially poker.
so, making money is not an exact science and triple digit returns=good....duly noted rife??? ......if your thing is not working then your thing is not working???? i feel weak and woozy... time for a little shuteye
I'm planning on ordering it. His last book was pretty clear on options. I like the idea of getting tidbits on derivatives modeling and trading.
My grandfather used to tell me stories about people in glass houses and why they shouldn't throw stones . . . EPrado, do you think anyone (MS) could learn a lesson from that?
Certainly true but let's put this in some perspective. We're on a trading board where individuals are trying to turn 5k into 5 mil. Not impossible. Just a 1000-1 shot. Literally. Thus salivating over a fund that returns 26% per year is almost a case of hero-worship. I'm not saying that producing a few billion a year in profits is easy or necessarily random. I am saying that depending on your risk or if your strategy has been enhanced by conditions, i.e. forces in play that you may recognize as in play but cannot predict will remain in play, then 26% or even 100% is certainly doable. It isn't freakin' earth shattering. Not to mention many of these strategies have an imbedded return. From that point it's only a matter of leverage. That style is far removed from Paul Tudor Jones just taking shots in futures while doodling at his desk and returning 100% 6 or 7 straight years.