Looking for Advice

[Overnight]

@BlueWaterSailor I am not sure how to send you thoughts on padu's responses, because I have many funny things to type, but he has me on ignore. Without context, none of it will make sense. Alas.

Here, man, have some groove before you pull a dest on him.

 

[Dr_Trade]

Don't loose hope, I know this answer is a bit repetitive but this is what as a trader we can say and can have. You have very tragic experience and this can happens with anyone. When I started trading I also suffered a huge loss but I never traded without trading plan, no matter how much in hurry I was. I keep some basics in mind that not to over trade and do not expect much from the trend. Second most important thing is trade with stop losses (an amount of risk you can take). Always back-test your strategy on different time frames and then execute that. These are few simple do's and dont's that can help everyone to a have fair and safe trades.

 

[MrMuppet]

I like brain teasers.

no to 2 assuming stock doesn’t pay divs.

what’s the answer to 1? Buy stock and short the bond? But no info on float of bond to market cap so you can’t determine recovery rates.

teaser 1 is a bit mean since you don't have all the info as you mentioned.
So you have to make an assumption:
1. the cash reserves are sufficient to cover the bonds: In this case you want to buy bonds and stock because bonds are trading to low. You'll get paid on the bonds and get a free ride on the stock.
2. cash reserves are not enough: In this case you'll have to guess the probability of default, buy bonds and buy puts on the stock. If bonds blow up you lose everything and you have to make enough on the puts to turn a profit. On the other hand if the bonds are paid, you'll most likely lose on the equity side. So the correct ratio bonds to puts is crucial.

 

[MrMuppet]

@rarefarefroghorn
just to get the facts straight: Four years of failure is basically nothing. If you are looking at a prop shop, out of 100 hirings about 50 leave after 6 months, further 30 don't survive the first year, 10 leave after the second year and from the 10 remaining about 2 are making serious money after 3 years.
That said, prop shops have training and mentorship, now imagine how the failure rates are for people who start without guidance.

On another note, there are also fields in this business that don't require P/L responsibility, like execution trading. You're so young that you would not have any issues to land a job in sales trading or as an analyst, HOWEVER, you have to bring something to the table.

Don't expect anyone to give you a job just because you are nice. Study, get good grades, do interns, network. Competition is extremely fierce and you have to compete

 

[sandy_s]

@rarefarefroghorn
just to get the facts straight: Four years of failure is basically nothing. If you are looking at a prop shop, out of 100 hirings about 50 leave after 6 months, further 30 don't survive the first year, 10 leave after the second year and from the 10 remaining about 2 are making serious money after 3 years.
That said, prop shops have training and mentorship, now imagine how the failure rates are for people who start without guidance.

On another note, there are also fields in this business that don't require P/L responsibility, like execution trading. You're so young that you would not have any issues to land a job in sales trading or as an analyst, HOWEVER, you have to bring something to the table.

Don't expect anyone to give you a job just because you are nice. Study, get good grades, do interns, network. Competition is extremely fierce and you have to compete

The only problem with sales trading is you will be no better than a salesman. But that may be one way to gain an initial entry...

 

[sandy_s]

do not expect much from the trend.

Do you mean to go countertrend most of the time? Well...that will knock one out sooner or later...and something new traders do very often.

 

[newwurldmn]

The only problem with sales trading is you will be no better than a salesman. But that may be one way to gain an initial entry...

that’s not true.
I know quite a few sales traders who have gone on to run successful hedge funds and successful RIA’s.

 

[newwurldmn]

teaser 1 is a bit mean since you don't have all the info as you mentioned.
So you have to make an assumption:
1. the cash reserves are sufficient to cover the bonds: In this case you want to buy bonds and stock because bonds are trading to low. You'll get paid on the bonds and get a free ride on the stock.
2. cash reserves are not enough: In this case you'll have to guess the probability of default, buy bonds and buy puts on the stock. If bonds blow up you lose everything and you have to make enough on the puts to turn a profit. On the other hand if the bonds are paid, you'll most likely lose on the equity side. So the correct ratio bonds to puts is crucial.

the critical component that’s missing is the cash burn or profitability of the company. If scenario A, within a year the bonds may not have a recovery value of 100. That’s what threw me off. Its a great interview question.

 

[MrMuppet]

the critical component that’s missing is the cash burn or profitability of the company. If scenario A, within a year the bonds may not have a recovery value of 100. That’s what threw me off. Its a great interview question.

yeah, I admit that I was a bit sloppy in creating that example

 

[newwurldmn]

yeah, I admit that I was a bit sloppy in creating that example

but the absence of information is what made it a good question.