3 ms·

Explain what trade? If the CEO dies the stock will go down due to the uncertainty of the future for the company.

kasey_junk 8y ago
Right. Give me literally the orders you put in, with a timeline for the hit. Then explain the price points, liquid capital & risk stats you need to make a particular profit. This is basic stuff for actual short sell trades so I presume it is easy to produce in the “hit a CEO” fund space.
- jjoonathan 8y ago
  I'm no trader, so I couldn't confidently craft a good strategy to exploit an opportunity even if there was a good one. How about you explain why you don't expect this to be workable instead?
  - kasey_junk 8y ago
    Sure. The first rule is that no trade is a good one without specific entrance & exit points. Saying “I can predict a share will go up/down” independent of that specificity & risk profile is a classic example of someone who isn’t realistic in their trading behavior. The second rule is that shorting is much much harder to get right than going long. Small procedural errors or day long mistimes of the market turn trades unprofitable. Third, the market for this trade is exceptionally non-desperate people. If you have the money to make this trade happen you have virtually risk free access to trades that keep you fat & happy. Finally, the riskiest part of this trade is the most hand wavy “hit a ceo” is not a thing I can get a counter party to hedge. It’s quite literally impossible for the vast majority market participants. Even before we talk about the very real likelihood of going to jail let’s talk about the risk of not being successful. See above about short timing. All told the answer to “why don’t rich guys hit other rich guys to short their assets” can easily boil down to “cause that’s stupid”
  - thatcat 8y ago
    It could work, but it would be easier and cheaper to introduce uncertainty in other ways.
- pathseeker 8y ago
  The problem is not the difficulty of the trade, the issue is that the SEC watches for people who profit off of unexpected events like this and unless you have a large track record of trading against companies it's going to put you right at the top of the suspect list. In your other comments you try to make it seem difficult but when you are in control of a hit at a specific time the risks can be heavily mitigated. The bet is not that the stock will fall, it's that it will underperform it's historic correlated stocks during that time frame. So the trade looks like this, find a stock with a very high correlation to the target (usually a competitor in the same space). At 9:55AM go long that stock equal dollar value you go short the target stock. This eliminates most risks induced by market-wide or even sector-wide price appreciation. Schedule assassination at 10:00AM. Close out the position when news breaks at 10:15AM or whatever. Even if the attempt fails, you will likely be close to even. Use margin or options to lever up. The trade is not the hard part of these schemes at all. The hard part is not getting caught because the trades are so easy that the SEC knows exactly what to look for.
  - kasey_junk 8y ago
    Well that and you are scheduling a murder for hire at a specific time & also the price movements of a share price at a specific time. While also managing the risk of either of those times being off even a little & not accounting for the risks of the criminality of the trade. Let me make this easier for you. Pick a share price now. A range of share prices post news event. A % chance each of those prices happen given the outcome you know will happen and an optimal execution path. Show your work on the Greeks. What does that look like for shorts? What happens when you add the risk pricing of “go to prison forever for being stupid” to the mix?
    - pathseeker 8y ago
      >While also managing the risk of either of those times being off even a little The correlation trade buys you a big enough window to easily coordinate that. We're not talking about seconds, more on the order of hours. >not accounting for the risks of the criminality of the trade. Yes, I already told you that. >Let me make this easier for you. Pick a share price now. A range of share prices post news event. A % chance each of those prices happen given the outcome you know will happen and an optimal execution path. Show your work on the Greeks. I'm not sure what your issue is. The trade is trivial and I already gave it to you. You can't assign percentage chances to the prices after the event because there isn't enough data on reactions to unexpected deaths to assign any meaningful volatility values to them. There is no optimal execution path in an event like that because it's predicting the size of what will be an emotional reaction programmed into headline analysis traders. Headline hits, stock price dumps from automated trading, close position 5 mins later and be happy with the money you make. > What happens when you add the risk pricing of “go to prison forever for being stupid” to the mix? This is what I already told you the actual problem is. The trade is trivial to make money on but it's going to be impossible not to get caught unless you do something a lot more clever to have it hidden in someone's constant trading pattern of shorts. But the trade that makes money itself is trivial. It's the same thing with any insider information really. If you know an announcement is going to come out at 10:00AM that a company is being investigated for fraud by the SEC, you just short it immediately before 10:00AM and then close the position 5 minutes after the headline or whatever. Any % chances you assign to various prices will be a meaningless exercise because price declines are all about the public's perception for that particular company.

Right. Give me literally the orders you put in, with a timeline for the hit. Then explain the price points, liquid capital & risk stats you need to make a particular profit. This is basic stuff for actual short sell trades so I presume it is easy to produce in the “hit a CEO” fund space.

jjoonathan 8y ago
I'm no trader, so I couldn't confidently craft a good strategy to exploit an opportunity even if there was a good one. How about you explain why you don't expect this to be workable instead?
- kasey_junk 8y ago
  Sure. The first rule is that no trade is a good one without specific entrance & exit points. Saying “I can predict a share will go up/down” independent of that specificity & risk profile is a classic example of someone who isn’t realistic in their trading behavior. The second rule is that shorting is much much harder to get right than going long. Small procedural errors or day long mistimes of the market turn trades unprofitable. Third, the market for this trade is exceptionally non-desperate people. If you have the money to make this trade happen you have virtually risk free access to trades that keep you fat & happy. Finally, the riskiest part of this trade is the most hand wavy “hit a ceo” is not a thing I can get a counter party to hedge. It’s quite literally impossible for the vast majority market participants. Even before we talk about the very real likelihood of going to jail let’s talk about the risk of not being successful. See above about short timing. All told the answer to “why don’t rich guys hit other rich guys to short their assets” can easily boil down to “cause that’s stupid”
- thatcat 8y ago
  It could work, but it would be easier and cheaper to introduce uncertainty in other ways.
pathseeker 8y ago
The problem is not the difficulty of the trade, the issue is that the SEC watches for people who profit off of unexpected events like this and unless you have a large track record of trading against companies it's going to put you right at the top of the suspect list. In your other comments you try to make it seem difficult but when you are in control of a hit at a specific time the risks can be heavily mitigated. The bet is not that the stock will fall, it's that it will underperform it's historic correlated stocks during that time frame. So the trade looks like this, find a stock with a very high correlation to the target (usually a competitor in the same space). At 9:55AM go long that stock equal dollar value you go short the target stock. This eliminates most risks induced by market-wide or even sector-wide price appreciation. Schedule assassination at 10:00AM. Close out the position when news breaks at 10:15AM or whatever. Even if the attempt fails, you will likely be close to even. Use margin or options to lever up. The trade is not the hard part of these schemes at all. The hard part is not getting caught because the trades are so easy that the SEC knows exactly what to look for.
- kasey_junk 8y ago
  Well that and you are scheduling a murder for hire at a specific time & also the price movements of a share price at a specific time. While also managing the risk of either of those times being off even a little & not accounting for the risks of the criminality of the trade. Let me make this easier for you. Pick a share price now. A range of share prices post news event. A % chance each of those prices happen given the outcome you know will happen and an optimal execution path. Show your work on the Greeks. What does that look like for shorts? What happens when you add the risk pricing of “go to prison forever for being stupid” to the mix?
  - pathseeker 8y ago
    >While also managing the risk of either of those times being off even a little The correlation trade buys you a big enough window to easily coordinate that. We're not talking about seconds, more on the order of hours. >not accounting for the risks of the criminality of the trade. Yes, I already told you that. >Let me make this easier for you. Pick a share price now. A range of share prices post news event. A % chance each of those prices happen given the outcome you know will happen and an optimal execution path. Show your work on the Greeks. I'm not sure what your issue is. The trade is trivial and I already gave it to you. You can't assign percentage chances to the prices after the event because there isn't enough data on reactions to unexpected deaths to assign any meaningful volatility values to them. There is no optimal execution path in an event like that because it's predicting the size of what will be an emotional reaction programmed into headline analysis traders. Headline hits, stock price dumps from automated trading, close position 5 mins later and be happy with the money you make. > What happens when you add the risk pricing of “go to prison forever for being stupid” to the mix? This is what I already told you the actual problem is. The trade is trivial to make money on but it's going to be impossible not to get caught unless you do something a lot more clever to have it hidden in someone's constant trading pattern of shorts. But the trade that makes money itself is trivial. It's the same thing with any insider information really. If you know an announcement is going to come out at 10:00AM that a company is being investigated for fraud by the SEC, you just short it immediately before 10:00AM and then close the position 5 minutes after the headline or whatever. Any % chances you assign to various prices will be a meaningless exercise because price declines are all about the public's perception for that particular company.