Joel Rubano
@TCK_JRubano
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Commodity trader. Trader education & development at Instradev, LLC. Author - Trader Construction Kit.
Joined December 2017
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Trader Construction Kit is a practical guide to developing the skills and techniques employed by professional traders at banks, hedge funds & financial institutions. Read the first chapter for free here:
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If you liked your old non-compete, you’re going to love the new Non-Equity Junior Limited Partner Deferred Compensation and Clawback Incentive Program with Proprietary Intellectual Property Agreement (NEJLPDCCIPPIPA), details of which will be in you inbox by the end of the week!
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One last thread on Binance/FTX and how nothing new ever happens in markets.
I used to have a post-it note on the monitor directly in front of my face that read “The front line is everywhere”, a quote from the Rage Against the Machine song No Shelter.
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The Roaring Kitty position disclosure reminded me of an old trader story that involves, as many of them do, a Texas Oil speculator. In this particular parable, the Texas Oil Trader is sitting at the bar when the person next to him asks why he seems so somber.
“Well, I lost $20
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I wonder how many salvage yards around the world realize that they are now running macro long-only commodity hedge funds.
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I just hit 3,000 followers, and to thank everyone that supports this account I am going to start the tradition of giving away copies of Trader Construction Kit. I will randomly pick three people who like this tweet (have to follow me, too) and mail them a hardcover edition.
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The comment by the CEO of Renaissance Technologies, that it is easier to teach markets to mathematicians than it is to teach math to market experts, may seem dismissive to market-centric people (which I count myself as, BTW) but in reality is more of a statement about what “math”
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@Rainmaker1973
For those concerned he is free-soloing, he is not. If you enlarge the photo he is clearly wearing a harness, is roped up, and is clipped into a quickdraw.
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Will: Of course that's your contention. You're a first-year option trader; you just got finished reading some sub-Reddit, probably. You're gonna be convinced selling vol is a strategy 'till next month when you find a copy of Dynamic Hedging. Then you're going to be talking about
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What book helped you the most in your development as a trader or quant? In my case it was the second edition of John Hull’s Options, Futures and Other Derivative Securities.
Respond with your best suggestions, bonus points for lesser known or more quantitative books.
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I had a twenty year career making markets and pricing customer deals in illiquid, horrifically volatile energy products and the degree to which I am getting worked over by my three year old twins on dessert and TV negotiations is absolutely shameful.
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Just got access to Bloomberg for the first time in forever and it’s exactly like grabbing an Infinity Stone in the Marvel Universe. Limitless power! How do I use it!?!
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I find the Jane Street OCaml bashing hilarious. They made $10B! Who cares if they used an Etch-a-Sketch hooked up to a potato battery?!? $10B!
Maybe it’s the potato battery with GLaDOS in it. That would explain a lot.
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It’s a shame Bear Stearns doesn’t exist any more. CNBC sometimes used to put a camera on their floor on Fed days and there would be one person with seemingly five phone handsets jammed into each ear standing in front of like 300 bond traders waiting to yell out the number.
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My first experience with distributed exchanges occurred today when I had dollar coins at the skating rink, a candy machine that didn’t take dollar coins, and twins demanding physical delivery of Swedish Fish and M&M forward contracts. The solution? Dollar coins into the drink
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There is a great TV show called Comedians in Cars Getting Coffee, where Jerry Seinfeld hops in a classic car and picks up a friend for lunch and some conversation. It’s usually quite funny.
Once, his guest told Seinfeld that he had originally wanted to be a boxer, not a
"This business is so invigorating to certain individuals, they’re going to work 24/7, and you’re competing against them. If you’re with people doing it for the money, you’re going to get run over." — Stanley Druckenmiller
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True story. When the blackout happened in 2003 I was working on a trading desk at a firm heavily impacted by the disaster. I also had an afternoon tee time.
The blackout happens and the market goes into turmoil. I messily close out all of my positions because who the heck knows
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I am loading up on new & classic option books for an upcoming project. For those just exploring the topic, here’s one of the very good ones:
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Trading is really only about three things:
1.Winning more than you lose.
2.Making more money on winners than give back on losers.
3.Managing risk to remain an active participant in the market.
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@macrocephalopod
Best part of Margin Call, other than Paul Bettany having to be the proxy for every senior trader ever, is when Jeremy Irons commands his enforcer Carmelo…who has somehow been invisibly sitting at the other end of the table all along…to bring in Stanley Tucci. “It’s done.”
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Whatever capital margin you think you need, you need more. Whatever access to liquidity you think you have, you have less. Plan for worse market conditions, expect higher volatility, and know that other market participants will act against your interests to serve theirs.
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For those who are in some way surprised that Steve Cohen as a multi-billionaire portfolio manager travels with an IT team and a portable trading desk, what did you expect? That he would kick open the door of a hipster coffee shop brandishing his smartphone screaming “I can’t get
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Don’t usually self-promote but really, really glad to be able to say that I just finished my Master of Science in Finance program.
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I kept it there to remind me that nobody in the market was my friend. Not other traders, not the clearinghouse, not the brokers, not the originators. Nobody. Every single person I interacted with was financially motivated to destroy me at all times.
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I’m convinced this is how option traders view the world.
“Sorry I was late for your talk, I got stuck in a local minimum”
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Have you read the prospectus for the Blackrock Bitcoin Trust (IBIT)? It’s 102 pages of industrial-strength legal language, as prospectuses invariably are. Chances are that 99% (if not 99.999%) of the people with positions in IBIT haven’t read it. I can absolutely guarantee that a
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I am currently teaching a class on options & futures, and am considering including a lecture on the worst & most challenging option trades I’ve seen during my career. The students really seem to like the practical examples from the industry.
The problem isn’t coming up with
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The Hedger’s Dilemma describes the risk of a prudent hedging program disrupted by rallying commodity prices, from TCK:
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A list of trading & finance twitter accounts worth following, by category:
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Might learn C++ this weekend. And by “learn”, I mean order a bunch of books, pile them up by my desk (with all of the trading, market microstructure & Python books) and wait for the osmosis to happen. How long until I can update my profile & LI? Days, probably, right?
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I just hit 4,000 followers, and to thank everyone that supports this account I am going to continue the tradition of giving away copies of Trader Construction Kit. I will randomly pick four people who like this tweet (have to follow me, too) and mail them a copy of the book.
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My attempts to negotiate my son down on his demands for additional mini-pancakes turned into a low latency market making exercise, with him yelling 5,4,4,5,4,3,4,5,3 against my stream of 1,3,2,3,2,1,2,3,3 until the market traded at 3.
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As to the question of why I was contemplating a PhD, it would be so I could make it through pages like this (from Algorithmic Trading and Quantitative Strategies by Velu, Hardy & Nehren) without my head exploding:
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I cannot begin to overstate how valuable the posts and threads by
@bennpeifert
@Ksidiii
@darjohn25
@jam_croissant
@SinclairEuan
and others are for anyone interested in learning the options markets.
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I’m enjoying watching the equity people freaking out over 24 hour trading. You can tell who hasn’t stayed up for two days obsessively refreshing a hurricane tracking webpage to find out if you are going to be buying a Ferrari for yourself or the person who sold you all the
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Weak traders find all sorts of ways to ignore, discredit or minimize the impacts of new information that is detrimental to their position. Weak traders seek out people who agree with them.
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A serious, non-snarky question for the anti-stop loss systematic/algorithmic traders:
In the absence of a stop loss, what mechanism(s) do you use to control against exposures (or the book as a whole) consuming more capital than intended at trade inception?
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In poker and in trading, one of the most successful approaches is a tight/aggressive bias where the player/trader exercises discipline to wait for superior risk/reward propositions.
one of my favorite poker stats.
there is an EXTREME power law across poker hands.
half of all profits come from either AA, KK, QQ, JJ, or AKs. 50%!
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Adverse selection is a crucial concept for aspiring & early career traders. I recently taught it to a class by inadvertently creating an example where I would be adversely selected against.
I brought a Rubik’s Cube to class and asked if anyone wanted to bet me that they could
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Jim Simons was a giant in the fields of mathematics and quantitative trading. His achievements in building and running Renaissance Technologies will in all probability never be equalled, let alone surpassed. A true legend.
It is with great sadness that the Simons Foundation announces the death of its co-founder and chair emeritus, James Harris Simons. Jim was an award-winning mathematician, a legendary investor and a generous philanthropist.
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The events of the last 48 hours between Binance, Alameda and FTX prove that nothing new really ever happens in the markets, and that those who ignore history are doomed to repeat it.
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Mattone informs him, in the bluntest possible terms, that his firm is finished. The rest of the market will figure out what he has, push his positions against him, and end his firm. And that is exactly what happens.
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First hardcover proof edition of Trader Construction Kit. Almost ready for publication.
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At a recent lecture a student asked the best way to break into quantitative/algorithmic trading coming from an excellent, but not traditionally heavily recruited, school. I reached out to a friend who develops trading systems at cutting edge financial institutions. Their advice
Do you want a job in quantitative trading? I compiled a list of college quant trading events and competitions. If I’m missing any, please comment below.
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I was completely shocked that a firm of FTX’s (apparent) resources and intellectual horsepower could be so easily liquidated. How could they not have been prepared for this potentiality? Did they not anticipate that this could happen?
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Assuming it proves out that this is all Roaring Kitty’s money, the position is real, and he is able to close it out efficiently, this has to be the biggest trading P&L generated by an individual, non-institutional trader ever, right?
I can’t think of anything that exceeds it,
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The lessons for other traders are clear. The easiest way to not get liquidated is to not put yourself in a position to be liquidated.
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Current commodity market events have lead to an increased demand for educational materials relevant to the space. Here is a list of commodity trading centric books, most of which I have read and would strongly recommend.
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All of a sudden, everyone is a natural gas trader. For those inclined to try, please know that it is a market where regional physical fundamentals can be critical price drivers and are, for the most part, beyond the observation of non-institutional traders.
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I don’t think I have any retail/inexperienced crypto traders as followers or mutuals, but if there are, please know that markets like the one Bitcoin seems to be currently experiencing are about as dangerous as it gets. I don’t have any position (other than maybe $3 worth in a
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Note to aspiring traders. When on a trading floor, any publicly expressed assertion can turn into market risk instantaneously. I have many stories that start with a flippant remark and end with a stack of cash. A briefcase full, in one case.
Peter I’ll take this bet with you. Any size up to $5m/$1m. Only condition is we need to escrow collateral with a trusted third party. Let me know.
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Roaring Kitty appears to face a significantly more complicated position management challenge with his current (alleged) position, one much more akin to those commonly faced by institutional traders.
Optimizing a highly visible, large, par or slightly in the money position with
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What differentiates great traders from good traders (other than the obvious, P&L)? What are the skills/behaviors/techniques that separate the elite from the merely very competent?
Very curious to see what people think are the key factors.
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I talk a lot about how poker is a great training tool for trading, mostly within the context of risk/reward assessment and money management. There is one other aspect that is massively useful for novice traders to internalize, the need for patience.
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@therobotjames
The best traders I’ve known had iron discipline when their view was proving out in the market, but an ability to instantly incorporate any new information and dispassionately exit any position not supported by the current conditions.
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Specialization in trading, explored through competitive Brazilian Jiu-jitsu. A long time ago, I was deeply interested in all things MMA and BJJ. I found a YouTube video of Roger Gracie competing in the 2009 World Championships of Brazillian Jiu-jitsu, called the Mundials.
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Trading firms with strong culture know that to develop junior traders they have to make the desk an easy place to learn hard lessons.
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I definitely did not forecast that the optimal basket of exposures would turn out to be Nvidia, Cocoa, and a dog with a hat.
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Very interesting that he identifies the portfolio risk management component as requiring the most complex mathematics. Excellent video on Jim Simons, founder of Renaissance Technologies, the most successful quantitative hedge fund of all time. Thanks to
@GoshawkTrades
for posting
4 minute masterclass on how to beat the market,
And debunking the Efficient Market Hypothesis.
By the billionaire hedge fund manager,
Jim Simons.
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40% of my LinkedIn feed is always at a conference.
Their job is just…conference.
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I just hit 5,000 followers, and to thank everyone that supports this account I am going to continue the tradition of giving away a copy of Trader Construction Kit. I will randomly pick someone who like this tweet (have to follow me, too) and mail them a copy of the book.
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I was reminded of this by
@CanteringClark
’s post about When Genius Failed, one of the greatest trading books of all time. There’s a minor episode in there that, for me, offers an incredible lesson in risk management.
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If you manage a university trading floor and would like a copy of Trader Construction Kit for the library at the facility, DM me and I will send one for free.
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@Ksidiii
I honestly can’t believe how much high quality material is being produced on twitter at the moment. I’m seeing multiple threaded posts per day from industry experts (yourself among them) explaining topics that were previously only ever discussed inside institutions.
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Excited to announce that I am now an Associated Fellow at the Erasmus Commodity & Trade Centre at Erasmus University in Rotterdam. I look forward to developing and presenting commodity-centric finance & trading curricula for the academic and industry partners of the ECT.
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Don’t think I’ve ever seen this many commodity trading jobs open on LinkedIn. Particularly energy traders.
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This is a photo taken at the most spectacularly talented trading firm I ever worked at. One year every product made money, every desk within those products made money, and almost every trader was profitable. The fact that you could wear combat boots to work was also nice.
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I post things like “Learn to code” or re-tweet articles about Market-making firms and others paying massive amounts for talented programmers with market-applicable skills and am invariably met with, “Yeah, but that’s for like five people”.
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Following up on a thread by
@nope_its_lily
, in my experience the four basic paths to getting onto a trading desk involve having:
1.Massive potential via intellectual horsepower
2.Unique or rare skills
3.Unique or rare domain knowledge
4.Massive desire and work ethic
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I coped my post on Renaissance Technologies over to LinkedIn and my suggested jobs went from senior energy trading positions to physics professor jobs and, I kid you not, NASA.
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@Jimmyjude13
And then it explodes higher on a 65 degree day in May with no news items and half of the market at the bar because it’s 3:15PM on a Friday.
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For a physical commodity trader, this is about the coolest thing ever.
The Mauritanian iron ore train is one of the longest and heaviest trains in the world and the most unique and incredible railway journeys one can take.
The train is up to 3 km (1.8 miles) in length, travels on a single track of 704 kilometres (437 miles), with 200 – 300 freight
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It’s been a while since I brought out the cast iron, but they turned out OK.
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I didn’t want to besmirch Benn’s latest epic thread on vanna with this reply, but I very much wish I could see a statistical analysis of how far the average reader got before their head exploded.
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@AgustinLebron3
@blo_viation
At the purest trading shop I worked at any assertion made to the floor in general was expected to be backed up by some willingness to bet on its validity. Forcing someone to put a price on their conviction clarifies the underlying arguments in a way that nothing else does.
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@KrisAbdelmessih
The universal sign that you have made an error in your pricing:
“How much of that do you have there?”
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John Meriwether, who at the time was widely considered to be the greatest trader who ever lived, had a meeting with one of his old-school, no-BS former colleagues Vinny Mattone. Meriwether mentioned that his fund was down 50%, but that they would be OK.
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True story: When I got my first real trading job I asked my boss why there had been a need to hire me, expansion of the desk or backfilling someone who had left the firm.
Backfilling, he said, a member of the desk had quit.
To do what, I asked, expecting to hear about some
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A long time ago I used to work with a trader named Keith who became overly fond of a hurricane tracking tool that had an animated projected path. When you refreshed the forecast the little animated hurricane would spin toward its destination accompanied by a loud “Woooosssshhhh”
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Want to go to an interview at a highly quantitative hedge fund and, as the interviewer starts talking, cut them off and explain that there isn’t time, because I am an employee from 5 years in the future sent back in time to stop them from committing the code that will destroy the
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@CanteringClark
I once watched a guy throw a stress ball across the desk and hit another trader’s keyboard, executing a trade in an unauthorized product. This resulted in, ironically, a lot of stress.
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One of the most interesting things about highly successful traders from large financial institutions (primarily banks) is the challenges they often face when moving to hedge funds or setting up their own firms.
Large financial firms often provide their traders with a tremendous
Goldman Sachs' $100m trader might struggle to find joy elsewhere
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@harmongreg
I do the same thing with my academic & industry lecturing. Taking elite practitioner advice from an anon account with a cartoon avatar is a bridge too far for some, but for those with the curiosity & patience to sift the wheat from the chaff Twitter is a tremendous resource.
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I just realized something. If crypto is leveraged to energy, and AI is double turbo leveraged to energy then…wait for it…you are all about to become energy traders.
Except the ones who were already energy traders, of course. You all stay the same.
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Following up on the excellent thread on poker as a training tool for trading by
@therobotjames
@be20684347
and
@AgustinLebron3
, here is a short excerpt from Trader Construction Kit on the topic, from the Instradev blog:
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@therobotjames
It’s obviously a top because it is near the top of the chart. This is called technical analysis.
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My wife just said “You know what we need in the basement? One of those classic arcade video games.”
Am currently on four different websites trying to get Tempest, Asteroids, Pac Man and Donkey Kong overnighted to my place before she realizes what she has done.
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New/novice traders tend to gravitate toward complexity, particularly extremely intelligent individuals with advanced degrees. They are attracted to the challenge of “solving the market”. Problem is, nobody solves the market. Nobody.
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@therobotjames
I used to warn junior traders that, if I did a really good job of training them, they would feel extremely underwhelmed at the conclusion of the lessons. Most of the “secret knowledge” that separates career traders from the people that don’t make the cut is very, very basic.
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What are the best modern trading books? I’d like to hear what people think are the best new books that have been published in the last decade.
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Stories that start with someone holding 90% of the volume in anything rarely have boring endings, in my experience.
A single trader is holding a futures position in tin equivalent to over 90% of the volume held in LME warehouses
@cangsizhi
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