Comments on: WHAT IS GOLDMAN SACHS TRADING?

By: eneique ponce de leon

eneique ponce de leon — Tue, 18 Aug 2009 11:29:45 +0000

100/10 (your stop loss percentage) = 120
10 x $500 (your R) = $5
$5,000/$20 (share price) = 260 shares

Tighter stop loss, same amount of risk, same R of $500.

Now let’s say you’d like to trade Intel options. You’re bullish, so you’re going to buy Intel calls. The options you want to buy are $2. Yahoo lists options prices by price per share, but option contracts are for 100 shares… So one of your option contracts will cost $200.

A straight call option position is much more volatile than a straight stock position. So you could set a wide stop loss of 50% on your call position. A wider stop will mean a smaller position size. Take a look:
100/50 (your stop loss percentage) = 2
2 x $500 (your R) = $1,000
$1,000/$200 (price per call option) = 5 option contracts

Different stop loss, different position size, different kind of asset, same R of $500.

You can use the concept of R to “normalize” risk for any kind of position… from crude oil futures to currencies to microcaps to Microsoft. If you’re trading a riskier, more volatile asset, increase your stop-loss percentage, decrease your position size, and keep your R steady. That way, you’re risking exactly as much money on each of your ideas.

By: anders

anders — Fri, 14 Aug 2009 07:32:41 +0000

There is no correlation between the trading desks action and the view from the analysts

By: X

Fri, 14 Aug 2009 02:49:31 +0000

TPC – that is funny the way you describe GS. When i was with a hfund our traders used to feel the same way!

By: MS

MS — Fri, 14 Aug 2009 01:57:16 +0000

That doc is 2 weeks old. Is there a way to follow Warren Buffet’s move? Did he reduce his equity position recently?

By: TPC

TPC — Thu, 13 Aug 2009 19:01:32 +0000

Do you trust the kid that beats you up and steals your lunch every day? No, but I respect his every move….

By: bzo

bzo — Thu, 13 Aug 2009 18:49:52 +0000

do you trust them?

By: Paul

Paul — Thu, 13 Aug 2009 18:42:17 +0000

that was a … fyi… It’s a great report…

By: Paul

Paul — Thu, 13 Aug 2009 18:39:51 +0000

Glad you got your hands on that report. I sent it to my broker yesterday, and it started making its way around the net.

By: kellybetpolice

kellybetpolice — Thu, 13 Aug 2009 17:54:52 +0000

onlooker,

have often do they come out with a strategy report? is it monthly? also how can we get access to the report in the future?

Thanks

By: TPC

TPC — Thu, 13 Aug 2009 17:26:39 +0000

The retailers trickle out over the following two weeks. I believe Target is the last major retailer on the 18th. That is of course unless you still consider Sears to be a major player….they report the 20th.

I’m still in cash. This market feel’s very very complacent to me. Investors are just chasing performance at this point.