Trader's Thread 01 (May 08 - Dec 08)

[kennynah]

<<I would think that if the Market Maker is rigging things against the retail investors, there would be another group of Professional Traders who would be betting against those Market Makers. >>

W : thanks for the response.

Let's just dwell into the above statement.
Perhaps, if i might be clearer if i explain it this way...

In order to have price equilibirum due to demand and supply, there must be both the demand and supply in laissez-fare manner. In case of asian warrants, there is a fixed level of supply and for any given warrant, the supplier is from ONE issuer. It is liken to a monopoly.

As in shares, you can "short" before owning the shares, and when price drops, one close off the "Short" by buying it back.

In asian warrants, one cannot "short" sell the warrant (correct me if i am wrong here). This "short" selling in actual fact, means "writing or issuing" the warrant. Such "writing or issuing" of warrants are done by the banks or corporations. This "writing or issuing" of the warrant is done when a retail investor BUYs that warrant at the exchange.

After the retail investor close off that BUY position, he is actually "SELLING to CLOSE" off that warrant position.

To Short sell a warrant is to "SELL to OPEN" a position...again, something, one cannot do....

and if this is the case, professional traders cannot take advantage of rigged prices... becos, they cannot "SELL to Open". Effectively, they, like u and me, can ONLY "BUY to Open" and "SELL to CLOSE"

regards

K

[kennynah]

hi W :

can u help me out here... i have been trying to understand JL's concept of "time" as I realize that you are well versed with his trading philosophies, thought i seek your kind explanation on this. many thanks in advance.

K

[winston]

In asian warrants, one cannot "short" sell the warrant (correct me if i am wrong here).

That is what I meant. Short selling warrants. Singapore was an anomaly and allowed short-selling of warrants and people were taking advantage of it. The short selling rules in Singapore are that you have to cover within the day or SGX will cover for you in three days.

Example:-
If you expect the market to go up, just short a put warrant and vice versa. The reasoning is that because the market makers were rigging the market to their advantage, short selling the warrants ( both calls & puts ) would take away some of that advantage.

Not sure whether they still allow it in Singapore. You may want to check this one out.

i have been trying to understand JL's concept of "time" as I realize that you are well versed with his trading philosophies, thought i seek your kind explanation on this.

k, not quite sure what your question is. Are you asking whether JL thinks in terms of days, weeks or months ?

If that is your question, I would think that he goes with a trend until there is a reversal. Since he uses about 50 brokers and take large positions, I would think that he operates in weeks to months. If I had not mistaken, he made US$100m ( ? ) during the Great Depression so he must have been shorting a lot of shares. Am on the road, so I cannot refer to the books on JL.

MM, maybe you can add to this as well after k clarifies his question on "time" ...

[kennynah]

W : thanks.

I duno what JL was referring to when he spoke of "time" vs "timing"...2 terms he used, but not interchangeably. Hence, my question.

On warrants, i am afraid we are not on the same page. It's ok.

[winston]

I duno what JL was referring to when he spoke of "time" vs "timing"...2 terms he used, but not interchangeably. Hence, my question.

Don't recall any discussion on time.

"Time" in market, may mean staying invested thru thick & thin ..

"Timing", may mean investing only when the market direction is in your favor..

MM, do u remember the discussion on "time" from the books on JL ?

On warrants, i am afraid we are not on the same page. It's ok.

There used to be a "loophole" in the Singapore market. They did allowed short-selling of warrants. Not sure whether you still can do it today or not.

1) If you expect the index or share price of a company to go up, then short the put warrant
2) If you expect the index or share price of a company to go down, then short the call warrant

The above strategy provide with you better odds when you are betting against the market maker.

If I recall things properly, there was also a book on the above strategy. I think one of the founders of Black-Scholes, ( Myron Scholes ? ) was using the above strategy ( when it was still allowed ), when he was running his hedge fund. Need to check up on it as I dont have that book in front of me.

You may want to check it out if Singapore still allows the above strategy. I dont play Singapore warrants anymore as it is a hazzle calling my broker whenever I want to trade Singapore warrants as I cant do it online at UOB-Kay Hian.

[kennynah]

There used to be a "loophole" in the Singapore market. They did allowed short-selling of warrants. Not sure whether you still can do it today or not.

hi w :

actually, what i wanted to say is this...

in asian bourses, one cannot "issue" warrants... those warrants listed in exchanges are "issued" by banks and/or major corporations. retailers cannot "issue" warrants.

shorting of warrants, whether allowed in asian bourses or not, is not similar to "issuing" warrants.

this inability to "issue" asian listed warrants by retail and professional players, cause price of warrants to be highly manipulated by the single issuer.

thanks for the discussion.

cheers man

[millionairemind]

W,

The only thing I remember very clearly about JL and his take on time is this...Time is Time and Money is Money...

Here are a few quotes from him regarding time and markets.

Don’t try to play the market all the time. It can’t be done, too tough on the emotions.”

“First, do not be invested in the market all the time. There are many times when I have been
completely in cash, especially when I was unsure of the direction of the market and waiting for a
confirmation of the next move....Second, it is the change in the major trend that hurts most
speculators.”

When playing the stock market, there are times when your money should be waiting on the sidelines
in cash…waiting to come into play. Time is not money – time is time, and money is money.
Often money that is just sitting can later be moved into the right situation at the right time and make
a fast fortune. Patience is the key to success, not speed. Time is a cunning speculator’s best friend
if it is used wisely.

Hope this helps.

Cheers,
mm

[kennynah]

MM : thanks.

[Cherry]

Hi Winston

1) If you expect the index or share price of a company to go up, then short the put warrant
2) If you expect the index or share price of a company to go down, then short the call warrant"

I think, for 1, instead of shorting the put warrant, it is advantagous to long a call warrant, as you can take your time to close the position if the price moves in your favour.
Similarly for 2, I think it is better to long a put warrant.

What advantages do you have by taking the short positions instead of the long positions?

"I dont play Singapore warrants anymore as it is a hazzle calling my broker whenever I want to trade Singapore warrants as I cant do it online at UOB-Kay Hian."

You can trade warrants online with Limtan, Philip, Kim Eng, OCBC, etc. Let it be known that you need a broker, and you will have hundreds of them knocking at your door. I have a customer-friendly remisier at Limtan who will be too happy to have you as his client. Just let me know if you need his service.

[kennynah]

cherry,

you are very helpful....we always welcome forummers with such traits..

look forward to your posts...

regards

K