The question of whether the dog wags the tail or the other way around is determined by where there is greater liquidity. Some argue the index drives underlying share value whereas it should be the other way around. This gets to the discussion of the value of indexing vs. active mgmt.
…you can always get good info about the index methodologies straight from the horse’s mouth. All available http://www.spindices.com/.
If you don’t know how to count cards before you play blackjack, you will learn nothing about it by playing. Options trading is similar. Your anecdotal experience will lead you astray. Enjoy and good luck.
Yeah, you were unclear on many very basic characteristics of the underlying index itself. Beyond that, you were confused about simple derivative principals such as the greeks and their impact on pricing. Thet counter arguments about market pricing and liquidity are somewhat secondary considerations. There are much better ways to learn and patience and introspection are good traits to have. If you’re finding yourself grouped with PA you are not on the right track.
figuratively speaking I have already started to learn how to count cards… doesn’t do any good unless you start practicing what you know in the field. I mean, with just small time bets to start, of course.
Amazing all the judgment, and you don’t even know the trade I made or how it fits with the rest of my exposure.
Well, we saw the dialogue and that was sort of a bit of a flag in that it was awful.
There’s also no reason to count cards in the field until your slick. Or really at all in this day and age the way most tables are rigged. It’s besides the point. You can get indignant or what not and choose to ignore us, but when a handful of professionals in an industry are trying to honestly offer you good advice and they all seem to agree that there’s a best way and wrong way to do things, generally it’s helpful to listen.
yea, I know the greeks and impact on pricing. I did not know about the volatility impact being stronger ATM, so now that is new. I spent *a lot* of time in the past year studying the price behavious of dervatives so I am a bit frustrated people assume I know nothing. I guess I don’t blame you and others for making that assumption, I know way more than a beginner level… but it is a complex topic so still learning.
Yep, the only thing you will learn at the table is whether you have what it takes to execute what you already know and whether the skills you have developed in practice will hold up under pressure. Handling the stress can improve with play. Others start strong and crumble as the months pass.
No one is saying you’re dumb or don’t know some things. To add some perspective, I don’t trade derivatives either for a multitude of reasons. One of which is that I don’t feel like competing against the market with those, another being high transaction costs and a third being that I’m poor as dirt and hate losing money. So it wasn’t a particular dig against you.
Hate to pile on…but you didn’t know when the option expired. You must not have even read the basic product info on a SPX Index Option, yet you placed a bet. Not the sign of a professional . If you look at it as playing slots, continue to have a ball.
BS and Ghibli… I’m only hype because you are right. I do have trouble with impatience and impulse. I’m going to try to be less stubborn and listen.
alright “product info on SPX index option”… I’m on it… right now!
Haven’t heard from this guy since the China stock market imploded. I’m looking forward to when he returns and tells us about how he foresaw everything and conveniently flipped all his longs into shorts, and he closed his short VIX position as well. We have much to learn from such a luminary.
^add that to your note cards, read during breaks
Question: Have you guys actually ever caught evidence that one of PA’s trades blew up on him or are you assuming such a crafty set up must crash and burn. Maybe he is really good at balancing his risk.
I was actually planning to print it out and do that! A couple weeks I took my SPXU prospectus with me 
His crafty setups primarily involve going long Chinese A share investments that always make money on every trade always.
That and his short vix position (good Lord I can only imagine the calls he must be getting on that).
Beyond that, when someone is in those markets (or any for that matter) and they control the flow of information and the information is always positive, you should generally have a very high degree of skepticism.
Bernard L Madoff Investment Securities LLC basically operated under that MO.
Actually, if you’re going to learn anything in finance, learning to call bullshit is probably the best skill out there. The rest is just textbooks and formulas that never work. There’s a great example where a man flips a coin 15 times and gets tails every time. He asks a PhD what the odds are of getting another tails and he says, “well obviously 50%, it’s an independent process”. The man then asks a trader from the Bronx who says, “of course it’s going to be tails!” because he knows the odds are higher that it’s a rigged coin than that he just witnessed a six sigma event.
Im excited to here how this collapese is really the US’s fault when he returns. I assume it has to do with all US economic data being fraudulent and China is the one paying the price or something crazy.
I don’t know of anyone who knows what his trades are, but he has fairly consistently been a “you should always be long” bull in a China shop and wants to short volatility because “it can’t lose,” and this is precisely the kind of thing that blows up both of those trades.
But the real issue is his personality type. People who are good at managing their risk tend to be fairly humble about their skill. They may say it comes from hard work and discipline, but quotes like “I’m a money making machine” and the like don’t tend to come from disciplined traders. Explanations of what’ going right and wrong tend to be more nuanced than “Americans are all doomed” and “China’s leaders are so smart that they’ve got this thing all planned out.” They’re able to tell you what mistakes they’ve made in the past and what they’ve learned from them. If you haven’t made enough mistakes in the past, you’re pretty much guaranteed to be making bigger ones in the future.
People with those personality types *do* tend to come from leveraged longs in the late stages of a bull cycle.
I believe it was Stanley Druckenmlller who said he could tell the stage of a bull market by how people talked to him at cocktail parties. When people didn’t want to talk about the topic at all, it was a market bottom. When people wanted to hear his advice, it was the middle of the up cycle. When people told him what he should be investing in, it was late in the cycle. When people thought they were being irresponsible by not being invested or leveraged, it was the verge of a crash.
Purealpha will undoubtedly come back with a story of how he sensed it all and switched positions just in the time of Nick to make a killing, or some such thing, but I must admit that while he was talking about how he was an alpha generating powerhouse, all I could think is “if we see more of these guys here, we’re due for a crash, but maybe he’s enough on his own???”
But the most convincing reason that his trades probably blew up: “If they hadn’t, you can bet yo sweet azz he would be here telling us all about how he just made bank”
bchad you funny bastard, i spit out my drink
What scares me the most about this time around is how poor the economy feels as the credit cycle feels like it’s peaking.