JP Grunin: From $10,000 to $100,000 in 6 months.
- Thread starter mGrunin
- Start date
It doesn't impact the volatility (option mkts) but it impacts the shares price and the resulting post-div distribution. Assume we are not talking about an option position. Is it more or less likely to touch 95.50 from a starting value of 92 or 89?
The option vola on AAPL is low (bottom two deciles)' but volatility is synthetic time. Each day that goes by results in the need for a higher volatility figure or a higher price on the shares(as a result of being long calls). So yeah, the vol was fairly priced. But only assuming that share vol > implied vol. IV can rise and shares could fall and result in a loss. Someone mention straddles -- those are a pure wager on vol to exp. This is a leveraged bet on price and a 20-vol you buy with three days to exp must rally (vol) to 30-vol with two days to exp (assuming no change in underlying).
My first job on Wall St was an options clerk on the American Stock Exchange. I still hate them.
Before things went fully computerized, trading desks all over the country would sit around all day and try to pick off price discrepancies between exchanges (Amex/CBOE/Philly/Pacific) ... total bullshit.
It's what HFT does today, except 10,000,000 times slower because instead of algorithms pulsating and probing over hi-speed fiber wire, it was a fat Italian dude waiting for me to pick up the phone in Manhattan to take his order: buy 5 contracts of MO at a 3 3/8 while his buddy called Chicago to tell the clerk there to sell the very same amount at 3 1/2 ... they watched specialists on all exchanges adjust their markets vs. the underlying stock price and would roll into action whenever an exchange lagged behind the others. the X factor was either me or the guy in Chicago would mess up the order (about a 5% chance because we didn't give a shit) or that one of the dealers would refuse the order and say "pick off" .... being the phone clerk I would have to be the bearer of bad news, usually 1-2 times a week and get blamed for it. Good times.
Kind of wish options were used solely for what God created them for, to hedge outstanding positions.
-
As per Martin's miss - I didn't see what happened, but a) he shouldn't have missed that if he had some skin in the game, b) traders miss shit all the time, and c) Martin's game just got upped - I guarantee it.
I don't understand the 6-month challenge. Martin: either work towards trading other people's money (how you get rich trading on Wall St - this includes Paul Tudor Jones & every other name people throw around) or towards the Tim Sykes model.
If I was young and had the interest in the markets I'd get a job anywhere doing anything and have an eye (2-3 years down the road) towards business school - business school matters - where you go and who you go with. Undergrad doesn't.
So you go to business school, state your goal to get involved in investment banking. Give that another 3, 5, 10 years - however long it takes to establish and make a name for yourself.
Play your cards right (impress the right people w/ your Rolodex intact) in the investment banking world you'll have tens of millions of money backing whatever idea you'd like. 30-40 years old and you can put yourself in position to be the next Jeff Bezos.
It's everything I never did.
It is gambling, just like poker. Pure luck decides who wins in poker, right?
. . . right?
What are you talking about? Div payment date doesn't mean shit. It's the ex-div date that matters.
No. Not like poker in the slightest, but it might seem that way if you don't feel like making the effort in finding out why this is so.
Yeah, I meant ex-div, my mistake. The synthetic at the close reflected an open of $589.20 to 0.50.
In many ways it is very much like poker. Decisions are made based on expected reactions by other participants. Unlike other forms of gambling you are not attempting to beat a system controlled by a specific set of rules governed solely by statistics. Understanding the actions and perceptions of participants is more important than pure odds.
+rep. MBA's matter, the choice of MBA matters (so many crap schools out there), the grades you get in the MBA matters, and the people you drink with matters if you want to get into finance. Even then you need to compete for the jobs in the fucking thunder dome.
Another (arguably safer) route is to get your Chartered Accountancy, do your CFA while you're auditing (firm will usually pay for it), and transfer into a finance job from there. Nothing shut's down an MBA like pulling CA rank over their smug asses.
I suppose it depends on your definition of conditional probability. Vol-arbitrage is simply relative value while outright directional trades in volatility is less so defined. Anyway, the vol-level is virtually meaningless now as it's a terminal bet on the upside distribution. He could've bought 15-vol and still lose.
But yeah, you're gambling any time you trade outright calls OR puts, because you're not isolated to volatility. Delta is the largest sensitivity.
An exception would be the market-maker bidding 7.90 for a call that is 8.00 in the money. He buys the call and sells shares. He's not looking to trade direction. The 0.10 discount to intrinsic is a payment for adding liquidity.
A pure-play on AAPL vol would be to buy the martin call and sell underlying, delta for delta, as close to a var-swap as possible. Terminal volatility must exceed the implied print he paid, but this also assumes discrete hedging intervals in the underlying. A lot of moving parts and a lot can go wrong if you miss a hedge.
What I am trying to state is that buying the 92.5C was a leveraged, defined-risk gamble on the underlying. So yeah, it's gambling. Buying a wide fly or straddle and hedging at 1, 2, 3 sigmas is also a gamble, but assuming that HV exceeds IV, not the share price.
But yeah, you're gambling any time you trade outright calls OR puts, because you're not isolated to volatility. Delta is the largest sensitivity.
An exception would be the market-maker bidding 7.90 for a call that is 8.00 in the money. He buys the call and sells shares. He's not looking to trade direction. The 0.10 discount to intrinsic is a payment for adding liquidity.
A pure-play on AAPL vol would be to buy the martin call and sell underlying, delta for delta, as close to a var-swap as possible. Terminal volatility must exceed the implied print he paid, but this also assumes discrete hedging intervals in the underlying. A lot of moving parts and a lot can go wrong if you miss a hedge.
What I am trying to state is that buying the 92.5C was a leveraged, defined-risk gamble on the underlying. So yeah, it's gambling. Buying a wide fly or straddle and hedging at 1, 2, 3 sigmas is also a gamble, but assuming that HV exceeds IV, not the share price.
CFA is very rigorous and in demand. I will disagree a bit in that a Harvard or Stanford undergrad in Compsci or Fi is more "marketable" than a UMich MBA. In terms of tier-1 IBs.
A friend of mine owns a trading firm in Boston. I used to go into his office and he would pull up all these accounts and show me how each and every single one of these traders would lose every single time.
It didn't matter if they started with $2500 or $250,000, they all ended up the same - a big fat fucking ZERO.
He told he in 10 years he has never seen a single trader not lose all his money.
Not 1! nada - zero.
In my experience at a retail futures brokerage, their clients predictably blew out 90-95% of the time, leaving a small handful of traders that would consistently breakeven or profit. And these were small time independent traders (managing their own money, usually $250k or less).
So it can be done -- even as a little guy with no insider... whatever. It's just the exception rather than the rule. Equating retail derivatives trading to professional gambling is a decent analogy: there are people making a consistent full time living from gambling, it's just a tiny percentage of the people trying to do it.
Also, in both trading and gambling you have to deal with the inherent probability that you will have prolonged periods where you lose money over and over again even if you do everything "right". Most people have free access to learn perfect strategy for both technical trading and gambling. The only "edge" is in having the the discipline, the risk management, and the sheer cojones to actually stick to that strategy in the face of supreme temptations to run scared or get greedy. Well, at least that's my theory, anyway. Maybe Jesus just loves them more than the rest of us.
Of course, I think most people in the industry quickly realize that being a broker or managing other people's money is a game with far better odds. The existence of this thread suggests that Martin already has.
[ame=http://www.youtube.com/watch?v=KX5jNnDMfxA]Dumb and Dumber 'There's a Chance' - YouTube[/ame]
I guess It can be done, and I guess there's a chance you'll get hit by lightning too :1orglaugh:
But you're right about where the actual the money is - churning and burning the accounts.
Day 2:
https://www.youtube.com/watch?v=S8LK...TbZLkG&index=3
Not much action on the closing price compared to my entry. I did pick up an additional $600 in losses, primarily due to theta burning away. Apple has been fairly range bound now for the past 7 days with continuously closing above $590 and testing $600 soon after. Taking this trade in the bottom of the range looks solid to me.
Tomorrow is ex-dividend day, so Apple should be expected to trade $3.29 below today's closing price which would bring it down to the $589 where it loves to bounce. The price coming down from ex-div won't necessary affect my position with the delta greek, but more so with theta. The position will be back in further OTM again, and with only two trading days left on the table, theta decay could get quite severe. If Apple fails to come up with any reasonable bounce in the AM, then I will have to look towards closing the position off due to theta. I would rather re-open the trade with an ATM strike, or 1 strike into the money preferably as we approach Friday.
https://www.youtube.com/watch?v=S8LK...TbZLkG&index=3
Not much action on the closing price compared to my entry. I did pick up an additional $600 in losses, primarily due to theta burning away. Apple has been fairly range bound now for the past 7 days with continuously closing above $590 and testing $600 soon after. Taking this trade in the bottom of the range looks solid to me.
Tomorrow is ex-dividend day, so Apple should be expected to trade $3.29 below today's closing price which would bring it down to the $589 where it loves to bounce. The price coming down from ex-div won't necessary affect my position with the delta greek, but more so with theta. The position will be back in further OTM again, and with only two trading days left on the table, theta decay could get quite severe. If Apple fails to come up with any reasonable bounce in the AM, then I will have to look towards closing the position off due to theta. I would rather re-open the trade with an ATM strike, or 1 strike into the money preferably as we approach Friday.
