Yoohoo Dr. Pangloss

Off Topic
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[quote]on edge wrote:

[quote]Dr.Matt581 wrote:

[quote]sufiandy wrote:

[quote]on edge wrote:

[quote]on edge wrote:
Here’s a competition that just might be right up your alley:

Anyone who considers themselves a trading ace might also be interested. I will not be participating but following along for interest and education.[/quote]

The way the market is behaving lately, I’m starting to think this “competition” could have been a glaring sell signal. When people start getting so bold and confident in their ability to make money in the stock market that they come up with games like this, its got to be a sign the markets topping.[/quote]

I think you were the one who started the pot thread, did you ever buy PHOT? I guess that and others are having issues recently.[/quote]

I wish that I would have seen that thread, I have done a lot of research on these companies when these medical marijuana companies started going public and came to the conclusion that none of them are worth buying. I remember a lot of threads on the subject had people getting all excited about the stocks. The biggest reason I heard was something along the lines of “people love smoking pot so let’s get in on this while the stocks are cheap.”

The major problem with this line of thinking is that when considering stocks one must look not just at the product, but more importantly the people running the business and their business model. Unfortunately these medical marijuana businesses almost always fail to have a good, and in some cases any, product and are run by shady and/or unexperienced people. Really think about the client base for medical marijuana: cancer patients, and other sick people. Even taking into account all the people getting prescriptions illegally there are not that many people buying medical marijuana and the growth is pretty limited. If you want to invest in drugs, go for ones that are available to the general population like tobacco and alcohol or legitimate pharmaceutical companies. There are some great tobacco stocks that consistently pay high dividends. The bottom line here is that until pot becomes legal to sell to the general population, pot stocks are going to remain a bad investment.[/quote]

Matt, you’ve already been out of the country for too long. Washington and Colorado have legalized pot for all. More states to come. Soon bong shops will be just like liquor stores.[/quote]

Washington and Colorado make up 4% of the states, and production and distribution is just starting. The industry is not at a point where companies should even consider becoming public and it still against federal law to manufacture, distribute, sell, and produce marijuana. That leaves a very, very small portion of the population that is able to use, make, or sell marijuana. That seriously limits the growth potential of even legitimate companies no matter how much investors pour into them. How many successful public companies do you know of whose product is only available in 4% of the country?

There is no way any company that specializes in marijuana production/sale is at the point where it would benefit from the capital raised from trading on the stock markets, which is why most of these companies are OTC and had to use various shady and unethical means to become publicly traded instead of an IPO. When the available market increases and companies have had time to establish themselves and develop solid businesses with good reputations then I will consider some for investment, until then these pot companies are not even worth a moment of my consideration.

22

[quote]Dr.Matt581 wrote:

[quote]on edge wrote:

[quote]Dr.Matt581 wrote:

[quote]sufiandy wrote:

[quote]on edge wrote:

[quote]on edge wrote:
Here’s a competition that just might be right up your alley:

Anyone who considers themselves a trading ace might also be interested. I will not be participating but following along for interest and education.[/quote]

The way the market is behaving lately, I’m starting to think this “competition” could have been a glaring sell signal. When people start getting so bold and confident in their ability to make money in the stock market that they come up with games like this, its got to be a sign the markets topping.[/quote]

I think you were the one who started the pot thread, did you ever buy PHOT? I guess that and others are having issues recently.[/quote]

I wish that I would have seen that thread, I have done a lot of research on these companies when these medical marijuana companies started going public and came to the conclusion that none of them are worth buying. I remember a lot of threads on the subject had people getting all excited about the stocks. The biggest reason I heard was something along the lines of “people love smoking pot so let’s get in on this while the stocks are cheap.”

The major problem with this line of thinking is that when considering stocks one must look not just at the product, but more importantly the people running the business and their business model. Unfortunately these medical marijuana businesses almost always fail to have a good, and in some cases any, product and are run by shady and/or unexperienced people. Really think about the client base for medical marijuana: cancer patients, and other sick people. Even taking into account all the people getting prescriptions illegally there are not that many people buying medical marijuana and the growth is pretty limited. If you want to invest in drugs, go for ones that are available to the general population like tobacco and alcohol or legitimate pharmaceutical companies. There are some great tobacco stocks that consistently pay high dividends. The bottom line here is that until pot becomes legal to sell to the general population, pot stocks are going to remain a bad investment.[/quote]

Matt, you’ve already been out of the country for too long. Washington and Colorado have legalized pot for all. More states to come. Soon bong shops will be just like liquor stores.[/quote]

Washington and Colorado make up 4% of the states, and production and distribution is just starting. The industry is not at a point where companies should even consider becoming public and it still against federal law to manufacture, distribute, sell, and produce marijuana. That leaves a very, very small portion of the population that is able to use, make, or sell marijuana. That seriously limits the growth potential of even legitimate companies no matter how much investors pour into them. How many successful public companies do you know of whose product is only available in 4% of the country?

There is no way any company that specializes in marijuana production/sale is at the point where it would benefit from the capital raised from trading on the stock markets, which is why most of these companies are OTC and had to use various shady and unethical means to become publicly traded instead of an IPO. When the available market increases and companies have had time to establish themselves and develop solid businesses with good reputations then I will consider some for investment, until then these pot companies are not even worth a moment of my consideration.[/quote]

4% is just the start. Getting in at the beginning of the trend can be very profitable. I do agree with you about the shady characters running those businesses though. I wish I had looked into Vincent M. Shyster before buying MDBX.

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It’s on:

Million Dollar Investment Competition | The Contrarian Investor Discussion Board
http://forum.thecontrarianinvestor.com/index.php?forums/million-dollar-investment-competition.18/

24

[quote]on edge wrote:
It’s on:

Million Dollar Investment Competition | The Contrarian Investor Discussion Board
http://forum.thecontrarianinvestor.com/index.php?forums/million-dollar-investment-competition.18/[/quote]

At 20%/yr return that takes 30 years. Seems more like a pipe dream than competition.

25

Should be interesting to follow along, especially if they do annual updates. I don’t think anyone will get there, but that’s not really the point.

As an aside, went out to dinner with some friends the other night. A guy I used to trade with years ago made $40MM in 2 months trading hogs. He doesn’t work for a fund or a bank. He’s an individual and is up $40MM. Crazy.

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700×512 69.8 KB

July hogs.

I guess he was long, lol.

27

[quote]Dr. Pangloss wrote:
Thanks OE!

I just got back from a week out of town, I’ll look at more of the website later but it looks like an entertaining read.

I was on the floor of an exchange for a long time and have seen some incredible trades. I saw the same guy make $1MM in less than a day on 2 separate occasions. [Note: lots of jargon ahead] The first was a huge fuck up by a bank. They offered a couple hundred FX call options for only their intrinsic value, no time value attached. The trader bought the first 200, and then as is custom, asked the bank to check their price. Banks HATE being lifted by individual traders, so the bank offered another 200 and the trader bought them. The trader in the pit asked the bank broker if he had any more, and then the bank brokers face went white when he realized what he (actually his client on the phone) had done. $1MM winner, instantly.

The next trade was the single greatest trade I ever witnessed. The same trader as above walks into an emerging markets FX pit and asks what the bid and offer are. Bank makes him a market for $20MM a few pips wide, and this guy offers the same amount in the middle. The market doesn’t move for 10 or 15 minutes, then the bank lifts the trader on $20MM. The trader is short the currency and over the next 4 hours, apropos of nothing, it completely falls apart and this guy nets $1MM by the end of the day.

There are tons of stories like that.[/quote]

I have no idea what I just read.

28

[quote]StevenF wrote:

I have no idea what I just read. [/quote]

I’ve cut through the jargon for you.

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[quote]Dr. Pangloss wrote:
July hogs.

I guess he was long, lol.[/quote]

The various futures markets are just fascinating to me. In my speculative trading account (please note - NOT my retirement savings) I sell options on futures far out of the money. Generally I find this a relatively lower risk/good return scenario. HOWEVER, when those futures move against you they can MOVE. Each of the different markets have their own drivers but to me the ag markets are the most opaque. For the most part I don’t work with them nearly as much as metals or energy.

30

[quote]Captain Needa wrote:

The various futures markets are just fascinating to me. In my speculative trading account (please note - NOT my retirement savings) I sell options on futures far out of the money. Generally I find this a relatively lower risk/good return scenario. HOWEVER, when those futures move against you they can MOVE. Each of the different markets have their own drivers but to me the ag markets are the most opaque. For the most part I don’t work with them nearly as much as metals or energy. [/quote]

The ag traders are some of the best traders in the world, hands down. But the horror stories that come out of those pits are awful. Ten and 11 days limit moves against you with no way to get out…

You walk onto the floor short hogs, the market opens and a broker takes the market limit up so you can’t get out then the market closes. And that happens day after day after day, and each day you’re bleeding a couple hundred thousand with no end in sight. OTOH, if you’re long it’s just payday after payday.

What markets are you trading?

31

[quote]Dr. Pangloss wrote:

[quote]Captain Needa wrote:

The various futures markets are just fascinating to me. In my speculative trading account (please note - NOT my retirement savings) I sell options on futures far out of the money. Generally I find this a relatively lower risk/good return scenario. HOWEVER, when those futures move against you they can MOVE. Each of the different markets have their own drivers but to me the ag markets are the most opaque. For the most part I don’t work with them nearly as much as metals or energy. [/quote]

The ag traders are some of the best traders in the world, hands down. But the horror stories that come out of those pits are awful. Ten and 11 days limit moves against you with no way to get out…

You walk onto the floor short hogs, the market opens and a broker takes the market limit up so you can’t get out then the market closes. And that happens day after day after day, and each day you’re bleeding a couple hundred thousand with no end in sight. OTOH, if you’re long it’s just payday after payday.

What markets are you trading?[/quote]

That sounds truly horrifying. One of the reasons that I trade options is so that I can get out even during limit moves. Of course another reason is that I don’t trade for a living and cannot watch the markets constantly.

My big go-to markets are gold, silver, oil and natgas as I know them the best after investing in equities for years with a focus toward these. I have also tried corn, beans, wheat and DOW index. My first year trading in this way (future options) I stayed with the metals and energy and I did really well. But I also did not experience any truly bad trades/markets. A few trades went against me but I had enough time to let the market come back and/or let time decay do its magic.

My second year I basically gave back all my first year gains (which were close to 100%). Ouch. That was the gut check year. Quite a few nights where sleep came hard. This is my third year and I am proceeding much more cautiously and with a few more battle scars.

It still seems to me that a well managed and cautious approach selling future options can be a good income generator. For the amateur like myself, I would never advocate for this type of trading unless you had a decent progression through savings, equity investing and covered calls first.

Cheers

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[quote]Captain Needa wrote:
A few trades went against me but I had enough time to let the market come back and/or let time decay do its magic.

It still seems to me that a well managed and cautious approach selling future options can be a good income generator. For the amateur like myself, I would never advocate for this type of trading unless you had a decent progression through savings, equity investing and covered calls first.

Cheers[/quote]

I’m glad to hear you’re still in the game. The emotional toll many times is worse than the financial one.

I love your strategy by the way, and if you check out the Tesla thread here, I recommended it to the OP. He was sitting on some large gains and selling calls would’ve worked really well in his case.

If there is any “free lunch” in trading at all it’s decay. I can’t scalp my delta to save my soul but once there’s only 5 or 6 weeks to go it’s so nice to be able to sit back and let the time value decay.

33

[quote]Dr. Pangloss wrote:
I’m glad to hear you’re still in the game. The emotional toll many times is worse than the financial one.

I love your strategy by the way, and if you check out the Tesla thread here, I recommended it to the OP. He was sitting on some large gains and selling calls would’ve worked really well in his case.

If there is any “free lunch” in trading at all it’s decay. I can’t scalp my delta to save my soul but once there’s only 5 or 6 weeks to go it’s so nice to be able to sit back and let the time value decay.
[/quote]

Thanks Doc. Completely agree on the head-games that trading plays on you. The whole ‘fear and greed’ dynamic is so true and hard to understand unless you are actually in it. Refusing to exit a position at 75% loss out of fear only to have it turn into a 1000% loss. Or not taking a 65% gain a few weeks early out of greed and only then see it turn into a 5% gain or even a loss. I am working on being more and more disciplined while still retaining some ‘auto-regulation’ (to mix metaphors).

I really appreciate the affirmation of the strategy coming from you. I tend to look at it as ‘selling insurance’ as I am buying risk in return for a small premium. With the added advantage of being able to resell the policy if I don’t like where the risk is going.

I did see parts of the Tesla thread but did not feel qualified to chime in. The time decay phenomenon of black-scholes is amazing. I used to sell about three months out but have switched to monthly expiration as I like the steeper slope of this duration.

I even experimented with this on equity options selling weekly expiration. I still think it is a good strategy but required too much time and not enough premium for the work for me.

34

You’ll appreciate this brutal story about Victor Niderhoffer. He had a huge short call position in the S&P futures during the '87 crash. On Monday, the S&Ps were down something like %20, but vol jumped from %36 to %150 so the price of his options - his short calls! - spiked. I don’t remember the number exactly, but Refco, his clearing house, wanted tens of millions more in margin. He didn’t have it so they blew him out of his position. What should have been a $100MM+ winner turned into a huge loser.

That’s enough to jump out of a window.

Edit: While I’m name dropping, I had a chance to work alongside Myron Scholes for a few years. I was definitely the mental infant at the table but it was illuminating.

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Thanks for sharing this! It is hard for me to comprehend sometimes the amount of capital and the swings that occur in these markets. In my first year of trading I was actually in that same position - albeit with vastly smaller sums. I had a trade going against me but with a few weeks left until option expiration.

I was new enough to not be as scared as I should so I held on to it as I believed that the price would come back. I also had a few other positions open so my margin was already nearing its limit. I received a number of margin violation warnings but before I had to cover the price mitigated just a bit. Eventually the price came back below strike and my shorts ended up expiring ootm. It was only until my second year of trading that I realized that while I was ‘right’ - that it takes a lot of capital sometimes for the privilege of remaining ‘right’.

I attended a webinar (free through my broker) given by a guy who manages sovereign wealth funds. When he, rather casually and in what I truly believed was a non-prideful way, mentioned that his average position size was measured in the billions I was just floored. Hearing that myself really gave me an appreciation for what a Whale is vs sharks, minnows, and then of course myself - krill.

Not sure if you have already answered this Doc - but if you are willing to share a bit more about your professional background and what you do now I would be quite interested (as I am sure many others would be as well). If not I understand.

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Sure. Do you have any specific questions you’d like answered rather than me typing out a bio?

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[quote]Dr. Pangloss wrote:
Sure. Do you have any specific questions you’d like answered rather than me typing out a bio?[/quote]

Sure, that makes sense. Thanks in advance.

  1. What do you do professionally at this point? I did not pick up on if you are an independent, trading desk, adviser, etc. I believe that I recall from another thread that you work in NYC but I don’t remember any more specifics.

  2. Over your career, what markets have you found the most exciting or challenging?

  3. You have stated that you have children; how would you characterize the challenge your career places on the family/work balance… Do you think it is harder than most jobs?

I will stop there for now to err on the side of brevity.

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  1. I’m a local, independent trader. I was on the floor of the exchange for 10 years, then left the floor to manage a trading firm I co-founded. Even while managing the firm, I traded for myself.

  2. lol, exciting and challenging can be 2 very different things. I loved trading eurodollars in the mid 90s (the interest rate, not the currency), ND and ES around 1998 - 2001, and the currencies since. Vol in the currencies has crashed; it’s currently hovering around %5 or %6 which is miserable. Interest rate products suck right now because of Fed policy right now. Energy and metals have been good the last 3 or 4 years.

  3. Great question. It used to be I would be in the office by 5 AM and leave at 4:00 in order to be home for the 4:30 re-open. While at home, I’d constantly checking the markets. Sunday nights were usually spent at the office with my traders preparing for the reopen so I’d leave the house around 4:00 or so. Definitely cut into family time. During the currency roll-over, I slept on the floor of my office at home so I could hear if I got filled. The 3 weeks around roll I would work 100 hour weeks. About 3 years ago, I was showing my kids a pipe that my dad had always smoked and we were discussing heirlooms. I asked what objects they associated with me. My 7 year old said, “Your computer.” Ugh, that one hurt. So I dramatically cut back on my hours and now I pick the kids up every day from school and take them to all their activities. My income has taken a small haircut, but it has done wonders for my stress levels and relationship with the kids.

1 Like
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[quote]Dr. Pangloss wrote:
Sure. Do you have any specific questions you’d like answered rather than me typing out a bio?[/quote]
Precisely how hard do you ball?

40

Ball so hard.

Keeper practice for my son, then gymnastics for my daughter, and school art show this evening. Homework, dinner, baths, and bedtime. Can’t sleep, so checking out TN with the help of a couple fingers of Glenlivet.