Ruh oh!  I just got super busy again…  so some of the posts I’ve been planning for next few weeks are going to be delayed. 

The last few weeks, the new business really sucked ass.  Apparently, the customers have been getting their asses handed to them being in bearish interest rates trades (rates go higher).  So here I am, the noob, saying "Hey guys!  These rates are looking kind of low."  Not a great way to get myself new business.  Um... maybe I need to read some more Art of War and figure out what the customers are doing first!

And to top it off, the shape of the yield curve has been very flat, and hadn't really moved.  So there was nothing really for me to pitch the last few weeks.  I spent so much time and made so little money this month I kind of felt like a short stacker - questioning why I was doing this, when flipping burgers might pay more.

Okay... not really - I enjoy the mental challenge of looking at the rates markets.  My specialty is finding trades that make money when your view is correct, but won't lose as much money when your view is not correct.  The thing I like about trading interest rates is that you have an extra dimension (maturity) you won't find in equities and commodities.  This greatly expands the number of possibilities.  I have the choice of 20+ widely traded 3 month interest rate futures to pick from.  I can say something about the 3 month rate a year from now as compared to the 3 month rate 18 months from now, vs the 3 month rate 27 months from now.  You have interest rate futures and options (and treasuries, swaps, agencies, corporates, high yield, emerging markets, Fed funds, etc).  And most of the G7+ countries have similar instruments.

I've been getting somewhat hammered on a number of trades because of the rally, combined with a little credit risk nervousness from the EU.  A sarcastic thanks to all my friends Greece!  I feel like a sheep...  getting f*cked up the ass by Gree..  eh hem.  I digress...  Since most of the trades I do have a lower downside than upside, I've minimized the losses on my bearish trades.  In fact, I'm still UP since I first started.  I guess that's something to be proud of.  It's like that session where you run really bad, but you end up making money anyway.  Eventually, the cards are going to turn your way...

So yesterday an investor said he wanted to do all my trades, so that was a pleasant surprise.  I think it’ll give my newsletter some added credibility and it will let me build a documented track record if I ever wanted to "trade" from home.  I'm not sure trading's a direction I want to go though - most people don't realize how time-intensive trading or managing money is (later post).  But you never know.  As I've been saying all along, it's good to give yourself "life outs."  And it's a pretty good deal for him... trying to get 20-30% thru me is better than the 1% at the local bank.  I'm *pretty* sure.

In before someone says, "Yes - but how much did you lose?"

Last winter, I had a really good business idea.  I figured I should wait until we moved before I started it, since I didn't want to take a month off after I just started the business.  Not sure if you remember, but when I was a trader, I was known as a broker's wet dream.  In a typical good trading year, my brokerage could be anywhere from 30-100+% of my net trading profits.  In a bad trading year, brokerage could be like a bajillion percent of my trading profits (assuming it was positive).  Anyway, I was always pretty good at coming up with and evaluating trading structures.  Alas, this is for interest rate derivatives (so nothing useful any of you guys can use).

So I said to myself, if I go back to trading I can make 10-12% of my trading profits.  Hedge funds pay more, but I really need to work at a big bank to do what I was doing.  I would go into the office and be there like 10 hours a day, 2 hour round-trip commute, watch the markets sometimes overnight (my markets trade 23 hours a day, 5 days a week).  I'll write a later post about why trading is not as great as people think - it's an awesome job, but there are lots of things people don't realize.

Or...

I can make 25% of say, 80% (my typical brokerage) of my trading profits.  And I can work from home.  And I just need to spend a few hours a day.  This assumes that I can get the rest of the market to put on the same volume as I alone had on in my book.  But there are plenty of trades where I can get people do do way more volume than I could in my book for risk management reasons.  So there was some upside to the uncertainty.

Thanks to the DOJ, I had a lot of free time on my hands so I started it two weeks ago.  I'm working with one of my ex-brokers to do this.  I get access to his clients and he gets access to a bunch of trade ideas and market thoughts (and hopefully trade volume) he wouldn't have gotten otherwise.  We split the brokerage.  Win-win.

We're still trying to get the clients to accept me as someone knowledgeable in the markets, so that will take time (or a bunch of profitable trades in a row).  We didn't reach a lot of people last week between the London bank holiday on Monday and the royal wedding on Friday.  But I still made about as much as I make in a typical poker week, so we're moving along.

The general plan is that I do this for a few hours in the morning and I play poker for a few hours in the afternoon.  We'll see how that goes.

The reason I'm mentioning this is just to highlight how important it is to have life outs.  Whether it's finishing school or fostering a good network of friends, or whatever, think things through and give yourself some options, in case your current option #1 doesn't work as well as you had hoped.