Trading Methods
Monday, September 27, 2010 at 11:15AMWritten by Michael Bigger. Follow me on Twitter.
When I traded single-stock derivatives at D.E. Shaw, I was fascinated by observing my boss trade S&P options. He made money consistently while taking very little risk. He was a trading magician. He knew his options market, especially the S&P, and he knew how to trade spreads. He was constantly trading in and out, squeezing juice out of the lemon. The lemon never ran out of juice! It was a wonderful thing—a winning trading method.
He started his career trading options for O’Connor & Associates and later for Swiss Bank before joining D.E. Shaw. All of them are/were great trading houses.
I am telling you this story because I want to highlight the importance of trading methods for traders. At Bigger Capital, we use several methods that include but are not limited to convexity, volatility, and correlation. Our trading methods are responsible for generating most of our trading profits. Recipes are very important, but the method you use for squeezing the juice out of the lemon is even more so.
We have learned so much by studying how other people apply their methods. Here is a list of some of the trading methods you might want to investigate:
- Direction
- Basket
- Correlation
- Volatility
- Delta neutral
- Algorithmic
- Market making
- Day trading
- Swing trading
- Trend trading
- Volatility trading
- Pairs trading
- Value
- Shorts
- News
- Follow
Expand your horizon. Explore the methods you know little about. Even better, develop your own.
Reader Comments (6)
What is your opinion about Trend trading of Volatility ?
I like that very much especially if there is a cockroach in a sector and the other stocks have not been affected just yet. That sorts of things.
Nice summary list of various trading methods. The way some of them overlap is an algo in itself.
JPO,
Absolutely.
Did you ever find out what was the secret to his trading method (very little risk and squeezing the juice)?
This is how I think about it; He was trading spreads and fitted his volatility curves perfectly. Then he just traded the heck out of it. It sounds simple but doing this over and over during many years was critical to his success.