The bailout exit comes to mind. It doesn't eliminate loosing however and stocks do go to zero. The concept of a betting table with no limit? At some point one would be risking a 100k to make a buck. It seems even with bailout one must have an 'uncle' point. Perhaps reversing a position around a pivot until some large R move comes to cover all the flip flop losses? Perhaps, but again, the waiting could get pretty sporty.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
How is "money management" for traders different from large fund management firms?
- Thread starter ezbentley
- Start date
The bailout exit comes to mind. It doesn't eliminate loosing however and stocks do go to zero. The concept of a betting table with no limit? At some point one would be risking a 100k to make a buck. It seems even with bailout one must have an 'uncle' point. Perhaps reversing a position around a pivot until some large R move comes to cover all the flip flop losses? Perhaps, but again, the waiting could get pretty sporty.
Ohhh... I see what you mean. I misunderstood. I've done some work on this. It's very interesting stuff. Good luck with it - too bad you can't trade OTC using a retail account - there are some institutional level stuff where this kind of analysis leads to real profitable trading opportunities.
Quote from rvince99:
not to maximize profits, but to maximize the probability of being profitable at a given horizon in time.
Quote from sjfan:
Ohhh... I see what you mean. I misunderstood. I've done some work on this. It's very interesting stuff. Good luck with it - too bad you can't trade OTC using a retail account - there are some institutional level stuff where this kind of analysis leads to real profitable trading opportunities.
I am totally lost here. Is this some "trade secret" that you cannot discuss in public? Or is it some kind of betting/position sizing scheme? Apparently I am not knowledgeable enough to understand you, can you point me to right direction if this is something that's not a secret?
Btw thanks for having this discussion everyone.
Nah. There's no trade secret. If I'm reading his strategy correctly, he's talking about positioning yourself so that the asymmetry of return is in your favor. The tools to that can be easy (ie, buy options - but you gotta pay for 'em) or very very difficult (capital structure arbs, structured notes arbs, etc).
My OTC comment was just on the fact that there are a lot of products that institutions can trade (like CDS, CDOs, etc) that have very big asymmetric pay off profiles.
My OTC comment was just on the fact that there are a lot of products that institutions can trade (like CDS, CDOs, etc) that have very big asymmetric pay off profiles.
Quote from ezbentley:
I am totally lost here. Is this some "trade secret" that you cannot discuss in public? Or is it some kind of betting/position sizing scheme? Apparently I am not knowledgeable enough to understand you, can you point me to right direction if this is something that's not a secret?
Btw thanks for having this discussion everyone.
Quote from sjfan:
Nah. There's no trade secret. If I'm reading his strategy correctly, he's talking about positioning yourself so that the asymmetry of return is in your favor. The tools to that can be easy (ie, buy options - but you gotta pay for 'em) or very very difficult (capital structure arbs, structured notes arbs, etc).
My OTC comment was just on the fact that there are a lot of products that institutions can trade (like CDS, CDOs, etc) that have very big asymmetric pay off profiles.
Thanks for the clarification. I understand that you can get skewed profit distribution in your favor by using derivatives. But he specifically said that his strategy is only "long equities." That's why I thought it's some kind of betting scheme derived from the leverage space model.
Anyway, I think it's more productive for me to read his book on LSP than guessing what he is doing.
Quote from rvince99:
My point is I am using the LSP model in a manner not to maximize profits, but to maximize the probability of being profitable at a given horizon in time.
This was an interesting discussion guys. Thanks.
Interesting ideas in this thread. Thanks to all contributors.
I've just read the introduction paper on LSP. It looks promising and I'm trying to figure out if and how we could use these ideas for our trading systems. For the moment we use resampling simulations that use historical data to find out the relationships between position sizes and expected drawdown distributions. By using historical data instead of correlations we at least reduce the problem with correlations changing when the markets go crazy. LSP seems like a very promising alternative.
/Hugin
It really is not an alternative per se. My point is, you are IN leverage space, somewhere, unavoidably, whether acknowledged by you or not. You are very likely moving around in it as well, further complicating things.
The "alternative," (upon acknowledging this unavoidable fact) is to harness it, make use of it, to satisfy your particular criterion (which may or may not be geometric mean maximization -- yes, you can clearly posses that criterion and acheive it with LSP -- but so too with other criteria in LSP).
That's the overview from 30,000 feet, anyhow, as I understand it.
The "alternative," (upon acknowledging this unavoidable fact) is to harness it, make use of it, to satisfy your particular criterion (which may or may not be geometric mean maximization -- yes, you can clearly posses that criterion and acheive it with LSP -- but so too with other criteria in LSP).
That's the overview from 30,000 feet, anyhow, as I understand it.
Absolutely, no argument there. The LSP introduction was somewhat of an eye opener. We did understand some of the problems with correlations and tried to fix it. But we have always known that our model was a bit naive.Quote from rvince99:
It really is not an alternative per se. My point is, you are IN leverage space, somewhere, unavoidably, whether acknowledged by you or not. You are very likely moving around in it as well, further complicating things.
The "alternative," (upon acknowledging this unavoidable fact) is to harness it, make use of it, to satisfy your particular criterion (which may or may not be geometric mean maximization -- yes, you can clearly posses that criterion and acheive it with LSP -- but so too with other criteria in LSP).
That's the overview from 30,000 feet, anyhow, as I understand it.
One issue is that as a result of how our trading system works our market exposure varies a lot and changes rather quickly so determining long term portfolio risk is not straightforward.
/Hugin