RM's occasional market calls...

moo · Nov 22, 2010

So Echo essentially didn't trust you one bit, not even a long-term and highly profitable client. What do they say about capitalism operating without trust...

But where can you get any better terms? Surely IB don't give you any leeway either, do they?

TheActionKid · Nov 22, 2010

Quote from Rearden Metal:

Ok, here we go again:

Long ZSL with 75% of max buying power, right here, right now.
ZSL current price: 12.86.
Time frame: 1-3 days.

Hopefully you don't have to take another "buck of heat". LOL

shortie · Nov 22, 2010

with the kind of disclosures RM made here on ET about his lifestyle it is hard to blame Echo for not giving him extra leeway.

oraclewizard77 · Nov 23, 2010

So you really put 75% of your net worth in ZSL?

Quote from Rearden Metal:

Ok, here we go again:

Long ZSL with 75% of max buying power, right here, right now.
ZSL current price: 12.86.
Time frame: 1-3 days.

Regarding Echo: I can no longer recommend them. My main problem with Echo was their increasingly tight, often illogical risk control. When I set up shop with them in 2003, there were no max share caps at all- I basically had a free hand to go up to 30-1 leveraged intra-day and 5-1 overnight. But about three years ago they instituted max share caps- They set the software to disallow large positions in any individual stock or ETF. These share caps became increasingly restrictive until I finally parted ways with the firm a year ago. On very low priced stocks (2-4$ stocks like Citi) I wasn't even permitted retail Reg-T margin without special permission. There was also a difference of opinion on what should be done when I'm caught in bad positions and my unrealized account balance went red. I wanted the ability to ride it out and exit when I saw fit, while Echo was most concerned about the hypothetical possibility of me blowing up my account plus taking it deep into the red. They saw fit to forcibly liquidate all my positions in such situations, even though I had the ability to wire in sufficient funds the next day to cover any negative balances I may have caused.

The way I saw it, I was an asset to Echo. I was paying (gross) over 1/2 mil/year in commissions, and steering many ET members their way. The way they saw it, the theoretical possibility that I might blow up all of my money plus some of theirs (just two or three months worth of the commissions I was paying at the time), and then not pay them what was owed by immediately bringing my account balance back up to at least $0 (even though I would have never done that... there's no way I'd have ever stiffed them out of a single penny owed in the event my balance went negative. I always had other liquid assets on hand to replenish my trading account should I ever blow it up)- well, that was their primary concern, and they took many steps to restrict my trading to avoid such a hypothetical situation from ever occurring, and it totally cramped my style. I'm not saying I was right, or that they were... we just had an insurmountable difference of opinion. I thought I was a big enough asset to the firm to be granted a little leeway, and they just refused to see it that way.

retaildaytrader · Nov 23, 2010

First rule, when it comes to money, dont trust anyone. You say you can wire in the cash, you say that you will, but what happens if you don't come through. You are a money maker, an asset, but that still doesn't mean you can be trusted to come through on your word. How many times has someone in your life not followed through?

Second rule, rules are rules. The firm is not like some casino you see in the movies where the pit boss can just waive their hand and give you a pass. There is a risk management plan in place for a reason and it applies to everyone. Even if you are a star player, the risk management plan is the foundation and the firm lives by it. There has been lots of volatility in the last 3 years and one bad slip could do some damage.

So why so shocked that they didnt give you a pass? If they trusted you and gave you a pass on the rules, then would they be doing the smart thing? Yeah, you brought in the rain for them, but do you blame them for maintaining a responsible risk-managed environment?

Quote from Rearden Metal:

Ok, here we go again:

Long ZSL with 75% of max buying power, right here, right now.
ZSL current price: 12.86.
Time frame: 1-3 days.

Regarding Echo: I can no longer recommend them. My main problem with Echo was their increasingly tight, often illogical risk control. When I set up shop with them in 2003, there were no max share caps at all- I basically had a free hand to go up to 30-1 leveraged intra-day and 5-1 overnight. But about three years ago they instituted max share caps- They set the software to disallow large positions in any individual stock or ETF. These share caps became increasingly restrictive until I finally parted ways with the firm a year ago. On very low priced stocks (2-4$ stocks like Citi) I wasn't even permitted retail Reg-T margin without special permission. There was also a difference of opinion on what should be done when I'm caught in bad positions and my unrealized account balance went red. I wanted the ability to ride it out and exit when I saw fit, while Echo was most concerned about the hypothetical possibility of me blowing up my account plus taking it deep into the red. They saw fit to forcibly liquidate all my positions in such situations, even though I had the ability to wire in sufficient funds the next day to cover any negative balances I may have caused.

The way I saw it, I was an asset to Echo. I was paying (gross) over 1/2 mil/year in commissions, and steering many ET members their way. The way they saw it, the theoretical possibility that I might blow up all of my money plus some of theirs (just two or three months worth of the commissions I was paying at the time), and then not pay them what was owed by immediately bringing my account balance back up to at least $0 (even though I would have never done that... there's no way I'd have ever stiffed them out of a single penny owed in the event my balance went negative. I always had other liquid assets on hand to replenish my trading account should I ever blow it up)- well, that was their primary concern, and they took many steps to restrict my trading to avoid such a hypothetical situation from ever occurring, and it totally cramped my style. I'm not saying I was right, or that they were... we just had an insurmountable difference of opinion. I thought I was a big enough asset to the firm to be granted a little leeway, and they just refused to see it that way.

Rearden Metal · Nov 23, 2010

But where can you get any better terms?
---->That's what I'm still trying to figure out.

So you really put 75% of your net worth in ZSL?
---->That's not what I said.

The whole thing with Echo... I probably shouldn't have mentioned any of it. Providing people with complete and honest answers when they ask me questions isn't proving itself as such a great policy. No wonder politicians never do this.

I'll make every effort from now on to quit being too honest for my own good...

retaildaytrader · Nov 23, 2010

Quote from Rearden Metal:

So you really put 75% of your net worth in ZSL?
---->That's not what I said.

Wait a second. You said you put "75% of buying power" into the ZSL, but now you are going back on what you said? If silver wasnt tanking like it is today then would you reply back differently? Lemme guess, you got more in your onsite gold and silver vault.

I'm being a little hard because someone might be trying to mimic your trades here and I dont want anyone to get ambushed as a result of a publicity stunt on your part. This isnt really a journal, but a chance for you to tell your story. Ok then, why not post a real thread so you can chit-chat about yourself? That way, no one will get ambushed.

Rearden Metal · Nov 23, 2010

Quote from retaildaytrader:

Wait a second. You said you put "75% of buying power" into the ZSL, but now you are going back on what you said? If silver wasnt tanking like it is today then would you reply back differently? Lemme guess, you got more in your onsite gold and silver vault.

I'm being a little hard because someone might be trying to mimic your trades here and I dont want anyone to get ambushed as a result of a publicity stunt on your part. This isnt really a journal, but a chance for you to tell your story. Ok then, why not post a real thread so you can chit-chat about yourself? That way, no one will get ambushed.

You can't possibly fathom how 75% of max buying power isn't the same thing as 75% of my entire net worth, so you therefore assume that I'm now 'going back on what I said'?
Interesting... and that would be your (reading comprehension) problem, not mine.

Anybody else have any ignorant, baseless assumptions they'd like to pollute this thread with, or are we done for now?

shortie · Nov 23, 2010

Quote from Rearden Metal:

...

Anybody else have any ignorant, baseless assumptions they'd like to pollute this thread with, or are we done for now?

i have one but i have the discipline to be silent.

on second thought...

could the trade be improved by using long GLD hedge?

Kassz007 · Nov 23, 2010

Quote from Rearden Metal:

You can't possibly fathom how 75% of max buying power isn't the same thing as 75% of my entire net worth, so you therefore assume that I'm now 'going back on what I said'?
Interesting... and that would be your (reading comprehension) problem, not mine.

Anybody else have any ignorant, baseless assumptions they'd like to pollute this thread with, or are we done for now?

Enjoying the thread. Keep the honest answers coming, it's very refreshing. Hopefully you don't get discouraged by the negativity some will post.

Question about the trade - you stated the time frame as being 1-3 days. Does this mean you will liquidate at the end of day three regardless of analysis? Or is there possibility to hold longer if your analysis at day three confirms your original thesis?