Monday, October 13, 2008

Adele, "Hometown Glory"

Trader A with the win!

So the way I'm working it now is this... if a trader takes top spot in the RO for the first time, he can pick even if he doesn't do a 50% spray. However, after he gets his first "freebie" he has to spray to get the music pick again.

The RO Report, "Insane Rip" Edition

Truly, these are wonderful times to be a proprietary trader. How much longer will it last? Your guess is as good as mine.

I mean, what's gonna happen tomorrow? Do we drop 500 points to consolidate?

Volume today, compared to Friday's level, was simply lame. We traded just over half the volume we traded on Friday... to me, that means shorts covered, and some longs entered the market, but for a 936 rip on the Dow, I'm left a little unsettled.

I haven't felt so neutral on the market since I started this blog. Amidst all this volatility, that feels odd.

Anyway, I just wanted to throw a few words out here about the RO. What it is, and why we kick so much ass.

When I started this blog a year and half ago, I was a lonely trader, locked in the confines of a spare bedroom in my house, trading for a mean overlord who didn't appreciate my consistency or work ethic. I needed some trading friends. So I started this blog, and quickly roped a few bloggers into reporting their daily P&L each day.

I called it, the Virtual Office. It was very gay, however, I made some good friends doing it.

Anyway, last December, after a string of 5 or 6 bad days, my old company, run by ogres and shitheads, called me and told me to send them money. My account wasn't close to being negative, and I had been with them for years, consistently making them money. So I took this request for more capital as an affront and told them to fuck off. They told me I could leave if that's how I felt. So I split.

Coincidentally, I had re-ignited a friendship that I had long thought dead. As it happens, this friend also ran a trading company, and so I joined his office in January of 2008.

At the time, it felt awful. However, as so often happens in life, events that you at first judge to be negatives, can turn out to be positives.

The vibe in the office was so solid, with great chemistry among the traders. They shared ideas, and they shared P&Ls. Soon after I joined, I decided to scrap the VO. I mean, I now had traders who played my exact game, sharing their P&Ls. I quickly lost interest in seeing how I compared to swing traders or futures traders. I just wanted to improve my performance relative to the guys who were trading what I traded everyday... stocks.

So the RO ("real office," as opposed to the original "virtual" office) that I report each day represents the top 5 and bottom 5 traders in my actual proprietary trading office. They are gross figures and they are real.

Okay, I hope that explains it. Let's get to the figures.

Out of 27 traders today, 23 finished gross positive, or 85%. 21 traders finished up over $1,000 gross. A record as far as breadth of wealth in the office goes... I was #11 of 27, nicely positive.

The Bosses demolished the Manservants today, so they get top billing.

Here are today's Bosses:

"Lucky Pierre" - Trader A, $93,496 on 798k shares traded.

2. Trader B, $87,744 on 1 million shares traded.
3. Trader F, $55,583 on 316k shares traded.
4. Trader D, $49,273 on 682k shares traded.
5. Trader Z, $32,509 on 430k shares traded.

And the Manservants:

"Chambermaid" - Trader K, -$4,417 on 274k shares traded.

2. Trader 3, -$481 on 9,600 shares traded.
3. Trader X, -$460 on 23,000 shares traded.
4. Trader Q, -$43 on 20,400 shares traded.
5. Trader 7, $308 on 2,600 shares traded.

Smoked Myself Early

Thus the quiet blog.

But I want to relay a funny conversation today. Not long after my XOM destruction, "Trader D" was bemoaning the fact that he owned 800 shares of CME, 10 points out of the money.

Trader D, "I'm fucking down 10 points on 800 shares of CME."

Trader I, "Why the fuck did you buy 800 CME?"

Trader D, "I dunno! I was planning on "lightening" once I went 2 points in the money!"

And that's why I bought so much XOM. I was expecting a quick break of $66 and I would have sold some out immediately. However, that scenario didn't play out and I wasn't fast enough to act on a quick exit.

Trader D, on the other hand, probably made 20 or 30 points on CME, because he stuck to his guns. Looking back, with XOM now nearing $67, I wonder if I should have held on...

Incidentally, Trader D is currently the "Lucky Pierre" while I'm on a few slots away from being "Chambermaid."

It's a funny game we play.

Stock Correlation Coefficients

As you know, the market is in constant flux. So it's important to constantly search for new ways to make money in the market.

I'm assuming that soon, this "crackhead trading market" that we're currently enjoying will give way to a kinder, gentler market again. One that rewards actual research.

One thing I have always found extremely important when I'm grouping my stocks on my screen, is to place them with other stocks that trade similarly. For example, I don't have JPM with XOM and IBM. Instead, I have JPM with the other bank stocks, XOM with the oil stocks, and IBM with the tech stocks.

One easy way to find out how "correlated" stocks are, is to use robots. Check out this link, type in a bunch of symbols, and you can find out how closely correlated their movements have been over the last 60 days. I've now blogrolled that site.

Here's an example of a search I did. As you can see, PFE is not at all correlated with the ferts.

Anyway, it's a good tool to use. Check it out, once things settle down again, you might find it useful.