Cawkwell's Evil Day

[theknifemac]

OK I understand now. My fault for making assumptions about how you were trading. I only day trade so I'm never in the market, premarket!

As for slippage making a stop meaningless - too true. But I've been stuffed in both directions - not just on shorts.

Jimbo, not sure that JPM invented VAR, they certainly did a lot of work on it with their RiskMetrics product which is now a separate company. Ahh it takes me back to when I worked for the JPM equity derivatives desk and we had a pseudo value at risk calculation which looked at the correlations of all the underlyings we had options on plus hedges and then ran 3 sets of x million simulations to come up with confidence levels of the most money we could lose due to adverse market movements. At the time this ran on some fairly powerful Unix workstations and took a long time to run. Those were the days indeed ! I wonder how quick those calculations would be now on todays hardware....

Also thinking about VAR further, this idea ties in with the approach of setting your stops to be some percentage of ATR away from technical levels so you can avoid normal market noise taking whipsawing you.

Finally, I hear what you are saying about Japanese management, I worked for one of the main Jap trading houses a while back and it was lets say a challenge !

Cheers

Mac

 

[CityTrader]

I think VAR is a tool for risk managers ( PM's, heads of trading, etc, etc) to be able to accurately assess their firms' risk capital. It accounts for the BETA, , Volatility, and liquidity of a particular instrument. So if for example, trader A is long of 10mil VOD, against a short of 6mil OOM's - the VAR will reduce to a simplified level what the firms risk is under various scenarios.

 

[jimbo57]

I think VAR is a tool for risk managers ( PM's, heads of trading, etc, etc) to be able to accurately assess their firms' risk capital. It accounts for the BETA, , Volatility, and liquidity of a particular instrument. So if for example, trader A is long of 10mil VOD, against a short of 6mil OOM's - the VAR will reduce to a simplified level what the firms risk is under various scenarios.

I agree. As a self directed trader however you are yr own Risk Manager/Head of Trading etc. As Trader333 said earlier, "your risk is not where you put yr stop loss". Anyone who thinks it is likely in for a series of nasty shocks.
A basic use of VAR will give everyone a quantifiable measure of their risk, encompassing changes in volatility, time spreads and cross instrument risk, as well as event risk. It's the last of these that usually catches the "stoppers" out.

 

[Deena]

Infamous BEAR RAIDER Simon Cawkwell, aka EVIL KNIEVIL, has taken a stonking £1.2 Million loss on his long standing short position in Regus.

After buying back the stock at the behest of broker Cantor Fitzgerald, a philosophical Cawkwell said, " Now and again the biter is bit."

Cawkwell held his 6m "shorts" with Cantor through Contracts For Difference ( CFD's ). He sold in the belief that Regus would go bust.

Instead Regus soared 47pc last week, to 49pence yesterday, after a US bankruptcy court approved a restructuring plan.

Source: Today's Daily Mail.

Just shows you can't win them all albeit I think he wins more than he loses.

hi

does anyone have any info on the genesis system ?? the trading edge.co.uk

thank you

 

[jmreeve]

A basic use of VAR will give everyone a quantifiable measure of their risk, encompassing changes in volatility, time spreads and cross instrument risk, as well as event risk. It's the last of these that usually catches the "stoppers" out.

Unfortunately, event risk is difficult to quantify with a high level of confidence.
I use guaranteed stops on some CFD positions if my overall portfolio risk is getting too
high to try to guard against event risk. This allows me to increase my overall gearing which
more than pays for the slight increase in spread.

 

[Marc100]

I use guaranteed stops on some CFD positions if my overall portfolio risk is getting too high to try to guard against event risk. This allows me to increase my overall gearing which more than pays for the slight increase in spread.

How does it enable you to increase your gearing?

For some reason this is going over my head.

 

[anley]

Marc

I think what he means is that because of the guarantee of a potential loss he always knows what the worst case scenario is, but with a normal stop the slippage could theoretically be massive.

For example say he bought £50k of Vodafone at £1.20 and put a normal stop at £1.10, tomorrow the company could announce a major fraud and the shares open at £1.00 so in effect doubling the 'expected' loss. But with a guaranteed stop £1.10 is the selling price even if the shares open at £0.50.

This means that he can take on more gearing knowing that nothing nasty can heppen.

 

[anley]

It's true that with shorting you can never make more than 100% but then this statement implies that people regularly make more than 100% on most of the stocks they buy!

If you buy/short shares looking for, expecting AND getting these kinds of profits then you're world class in my book.

 

[spreadboy]

Food for thought, successful traders do not have opinions and they are professionals, certainly not gamblers!

 

[jimbo57]

Food for thought, successful traders do not have opinions and they are professionals, certainly not gamblers!

On the contrary: succesful traders always have an opinion: in/out/stand aside, they are professional, and as for not gamblers: depends on your definition of gambling! (there are about 5 in my dictionary, and several are valid)

 

[Marc100]

This means that he can take on more gearing knowing that nothing nasty can heppen.

Thanks!