sorry if i'm misunderstanding, but do you feel that stops would help prevent this? i have no numbers to back this up (and so i ask this out of sincere curiousity - not arguing one side or the other), but its seems highly likely that an event which would cause a stock to move >50% wouldn't cause a trading halt and massive gap. at which point, your stop may cause even more harm. no?
Grinding it out, day after day
- Thread starter lescor
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sorry if i'm misunderstanding, but do you feel that stops would help prevent this? i have no numbers to back this up (and so i ask this out of sincere curiousity - not arguing one side or the other), but its seems highly likely that an event which would cause a stock to move >50% wouldn't cause a trading halt and massive gap. at which point, your stop may cause even more harm. no?
i don't want to hijack lescor's thread more than i already have
. i did not say that stops would have improved his potential drawdown. i personally don't believe much in stops for RTM strats. -150K was an illustration of the kind of losses that are possible from just one trade given his position size.
I can't help but think that if it were this easy to make 9-11% with little principle risk, then one would think the tens of thousands of banks, hedge funds, financial institutions, insurance companies, well-funded investors, financial advisors, sovereign wealth funds, and even state/local/federal governments would have thought of it before an individual saying he lost almost $200,000. In other words, it rarely works that way.
When one is so sure that you are seeing light at the end of a tunnel, it might actually turn out to be an oncoming train...
Quote from shortie:
i don't want to hijack lescor's thread more than i already have
And what was my position size in this trade?
Maybe you read too fast through my details or I was not specific enough. Let me amplify a bit more. For the first six months of 2009, I accumulated nothing but high trench A level company quality bonds, like Prudential, JPMorgan, Goldman Sachs, SunAmerica etc. with various time frames between 15-25 years. I got them all at steep discounts below par because of all the market craziness at that time.
So take Prudential for example, I loaded these particular notes between 40 and 50 cents on the dollar with a 5.6% coupon. This gives me an actual annual yield in the mid teens. As long as I do not sell the bonds, I get this double digit return every single year until 2028 and at that time when they are redeemed at par I will also receive double my money back.
Now going forward from now I still only accumulate top trench A level bonds as well. But these yields will be in the 5.5%-6.5% range. When I extrapolate this though with what I already have accumulated that I detailed above; over the course of the next decade, it comes out to somewhere around 10% annually.