Don's Openings, Part 6 2003

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Quote from nitro:


I have thought about doing the many many stocks approach. What scares the hell out of me is the day when you get filled on a hundred or several hundred stocks on the LONG side, and a 9/11 event happens and I can not find a bid and spoos lock limit down, and the exchages close down.

Although "unlikely," boy I just don't see how a firm let alone a trader can survive that kind of event. My guess is that a firm like Bright, since most of the calculations are similar, are getting filled with tens of thousands of shares over hundreds of stocks on any given day IN THE SAME DIRECTION. The asymmetrical risk to the firm has to be enourmous.

If I were doing the spray and pray method of trying to get filled on hundreds of stocks, I would risk like crazy to go short, but I would limit my longs.

nitro
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fascinating point, nitro. i agree with your view. looking forward to don's response.

best,

surfer
 
We have very few who do "hundreds of orders"....and since we get filled on both sides, long and short, the overall outcome levels out.

If we simply planned our trading based on the 1 in a millioon "possible outcome" then there would be no trading at all.

We just keep "pluggin away"......until "doomsday" lol

Don

:cool:
 
Don,

What about buying cheap WAY out of the money OEX puts once a month to keep the firm approximately Delta neutral on those days where you may be extra long? The losses on the OEX puts would be tax deductible...

I agree this is a 25 standard deviation event, but we seem to get 20 standard deviation events once every ten years [a twenty standard deviation event "should" happen approximately once every three million years.]

nitro
Quote from Don Bright:

We have very few who do "hundreds of orders"....and since we get filled on both sides, long and short, the overall outcome levels out.

If we simply planned our trading based on the 1 in a millioon "possible outcome" then there would be no trading at all.

We just keep "pluggin away"......until "doomsday" lol

Don

:cool:
More...
 
nitro,

i utiilize an interesting bull debit spread with way out the money NDX options. it is a slow slow grind, and sometimes scary due to cost of these individual options, but has been quite profitable.

don's strategy goes both long and short, balancing out the asymetrical risk factor for the firm.
best,

surfer
 
Quote from nitro:


I have thought about doing the many many stocks approach. What scares the hell out of me is the day when you get filled on a hundred or several hundred stocks on the LONG side, and a 9/11 event happens and I can not find a bid and spoos lock limit down, and the exchages close down.

Although "unlikely," boy I just don't see how a firm let alone a trader can survive that kind of event. My guess is that a firm like Bright, since most of the calculations are similar, are getting filled with tens of thousands of shares over hundreds of stocks on any given day IN THE SAME DIRECTION. The asymmetrical risk to the firm has to be enourmous.

If I were doing the spray and pray method of trying to get filled on hundreds of stocks, I would risk like crazy to go short, but I would limit my longs.

nitro
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Yes, this is a very valid point Nitro. I would like to know what happened with the openings the day the market crashed in October 1987. Also, didn't a jetliner crash in NYC in I think it was November 2001 a few minutes before the market opened? What would have happened if the plane crashed at 9:35 EST? I wasn't trading at the time so I don't know what openings were like on that day.
 
The day was Sep 11 2001 for Christ sake.

I don't want to give people fuel to bash Don or Bright Trading with this post. Just be aware that "black swan" type of events seem to be more and more common these days.

Read Taleb's book.

nitro
Quote from GapTrader:




Yes, this is a very valid point Nitro. I would like to know what happened with the openings the day the market crashed in October 1987. Also, didn't a jetliner crash in NYC in I think it was November 2001 a few minutes before the market opened? What would have happened if the plane crashed at 9:35 EST? I wasn't trading at the time so I don't know what openings were like on that day.
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Quote from nitro:

The day was Sep 11 2001 for Christ sake.

Read Taleb's book.

nitro
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No, there was a crash in November, I think, just around the opening. The market went straight down and I lost money, only to see the market turn up when we realized it was no terror.

BTW, Taleb's Fooled by Randomness is very good.
 
Ah,

You mean in Italy or the one in Queens?

nitro
Quote from Pasternak:



No, there was a crash in November, I think, just around the opening. The market went straight down and I lost money, only to see the market turn up when we realized it was no terror.

BTW, Taleb's Fooled by Randomness is very good.
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