Don and Mav, Part Deux! (Live Chat)

[Don Bright]

Quote from Hooked2000:

The trade in question is a paired trade right? COF short with a PVN long...I was in that trade as well when earnings for PVN came out(it was oct of 2001 I believe). They took PVN out back and shot it after earnings and the conference call. I listened to the the whole CC. Management was nervous and couldn't answer questions with confidence. All earnings estimates were in doubt as well as managements ability to run a company. I had to get out as it sounded like outright fraud and mismanagement. There were shareholder lawsuits (I actually got a check a couple of months ago from the shareholder lawsuits).

I also followed PVN after the blow up...they lost money in some of the following years. had a negative P/e and cash flow....Fundamentals did change.

Did anyone "pair" up enron with anything and ride it down....how about UAL? Or any of the other 1000s of companies that went bankrupt.

Anyone in this "trade" went from trader to gambler/investor. Is this considered trading?

Actually it started off as long PVN, short COF..ended up pretty much straight long PVN...simply moving a "trading pair" into a longer term investment (for the fundamental reasons mentioned before)....

Geez, I never thought a few trades (of millions) and a stupid magazine article would bring about so much debate...but (once again) good stuff or my magazine articles...

Don

 

[Don Bright]

Quote from mschey:

Your facts are wrong....Bob was long GM.....long GM from 38 or so.

Yep, pretty much the case....we were in some pretty good company (Kirk Kerkorian, and a few others for example)...along the way.

First amendment rights are still intact, but as the famous Rodney King said "can't we all just get along" LOL....

FWIW, Mr. Schey one our best traders, and I can certainly say that Mav is an excellent trader/manager - and, gee....I can see those "A-type" personalities from here....pure testosterone and beer, LOL.

And yes: "Don and I have a mutual respect for each other in that I don't think he is a bad guy, nor is his brother. However we see the business very differently. I have exchanged barbs with Don for years now. - I attest to Mav's remarks.

Actually, makes for better ET fodder than a heck of a lot of other stuff we see here....LOL again.

Well, now that Tiger Woods won his 7th straight tourney, I guess I can turn the TV and the computer off for a while....

Don

 

[Maverick74]

Quote from Don Bright:

Yep, pretty much the case....we were in some pretty good company (Kirk Kerkorian, and a few others for example)...along the way.

First amendment rights are still intact, but as the famous Rodney King said "can't we all just get along" LOL....

FWIW, Mr. Schey one our best traders, and I can certainly say that Mav is an excellent trader/manager - and, gee....I can see those "A-type" personalities from here....pure testosterone and beer, LOL.

Actually, makes for better ET fodder than a heck of a lot of other stuff we see here....LOL again.

Well, now that Tiger Woods won his 7th straight tourney, I guess I can turn the TV and the computer off for a while....

Don

Gee, how did I know that Mike Schey traded with you Don? LOL. It was so hard to tell.

Don, believe it or not, I think these conversations are very productive on ET. Not the bashing from the Mike Schey's of the world, but the back and forth on why we trade the way that we do.

I was not attacking Bob in my previous posts but was interested in the logic behind the trade. I would love to do point/counter point with you Don, because as you know, I don't give anyone a free pass and I love to argue. LOL.

If you want to debate the merits of that trade with me, I'm game. Or not, that's fine.

If we changed the ticker to GOOG and instead of using 8 to 2 we used 500 to 125, you can see how bad that looks. BTW Don, over dinner, this is one of the things I didn't like about pair trading. The possibility of a pair blowing out and you having to turn it into a long term investment and add to a loser. Maybe not a big deal for Bob, but for most of the traders in your group, that isn't going to fly.

 

[Don Bright]

Quote from Hooked2000:

question for the Brites...is it ok for students to trade that way?

Also is it a matter of course for others in your firm to keep adding?

Our students are taught to trade the way(s) that we see the most profit potential, and yes...they trade pairs and do a heck of a lot of funamental analysis (and a lot, lot, more). And, yes, risk is based on return potential and bankroll (but, no, I would not suggest that a new trader hold onto a long term trade in lieu of focusing on good trades, but then again, Bob is not a new trader and always has millions of shares in play).

(Sorry for the multiple respoonses, still reading, still trying to turn off computer...but the "Mav and Mike Show" is so darn riveting.....

Back to work tomorrow, thank goodness....


Don

 

[IV_Trader]

a bit off subject...This is not a first time I heard from Mav ( and Riskarb) negative comments on pairs trading. Two ( or more) entities with the SAME stats vols AND very high correll , what can be so bad here ? What am I missing ?

 

[Hooked2000]

Quote from Don Bright:

Actually it started off as long PVN, short COF..ended up pretty much straight long PVN...simply moving a "trading pair" into a longer term investment (for the fundamental reasons mentioned before)....


Don

So the "trade" turned into an "investment". Thats no problem if you trading with money you can afford to lose.

One thing I do recall were the fundamentals...they changed, they actually lost some money before it got better. I know this because after I blew out of the pair in my prop account, I bought PVN in my personal account. I made a good chunk of the money back, but by no means was this a good trade, it was a gamble.

I suppose at 2 bucks a share your pot committed.

Quote from Don Bright:

Our students are taught to trade the way(s) that we see the most profit potential, and yes...they trade pairs and do a heck of a lot of fundamental analysis (and a lot, lot, more). And, yes, risk is based on return potential and bankroll (but, no, I would not suggest that a new trader hold onto a long term trade in lieu of focusing on good trades, but then again, Bob is not a new trader and always has millions of shares in play). -Don


Hooked2000
LOL Im picking up what your laying down. I assume firm liquidity was never an issue when cannonballing in. For our firm it was an issue, as all of our pair traders were in PVN in SIZE.

I really think we got lucky that PVN came back from the dead. It really is one of the few that do. For every 1 PVN type winning gamble(let call a spade a spade). There are 10 that dont work.
Enron, calpine, LU, UAL, @home, on and on...Look at a GTW HPQ spread. I know for a fact it was right way fundamentally to be long GTW short HPQ (compaq). It never came back.

 

[GGSAE]

Quote from IV_Trader:

a bit off subject...This is not a first time I heard from Mav ( and Riskarb) negative comments on pairs trading. Two ( or more) entities with the SAME stats vols AND very high correll , what can be so bad here ? What am I missing ?

I don't understand why Mav seems to blanket us pair traders with the same brush.

There's probably over 30 strategies w/n pairco and I happen to know of several very good pair traders that only trade intraday, rarely holding any positions overnight.

 

[WyckoffTrader]

Mike and Mav,

Spend your energy and time making some good money for your own account this week and than next weekend.....drink some beers, smoke some Herb and chill ......while watching the SuperBowl.

Go Bears//////// Make love not war.

 

[Maverick74]

Quote from GGSAE:

I don't understand why Mav seems to blanket us pair traders with the same brush.

There's probably over 30 strategies w/n pairco and I happen to know of several very good pair traders that only trade intraday, rarely holding any positions overnight.

I don't have anything against pair trading and certainly did not condemn it on this thread. My problem was with buying PVN from 8.00 all the way down to 2.00 and saying it was a great trade after it recovered, taking a 75% drawdown in the process. That has nothing to do with pair trading. Not sure how all my posts are being misunderstood on this thread. I have stated this now about 10 times.

 

[Maverick74]

Quote from WyckoffTrader:

Mike and Mav,

Spend your energy and time making some good money for your own account this week and than next weekend.....drink some beers, smoke some Herb and chill ......while watching the SuperBowl.

Go Bears//////// Make love not war.

Jeff,

This conversation was pretty friendly between me and Don before one of his pitbulls got let out of the cage. LOL. I couldn't shake that thing off my leg. Don is actually one of the few people on here I can have serious conversations with over trading without someone's ego getting bruised and ad hominem attacks. I'm not worried about the Bears, they'll take care of business.