Tibra’s profits -31% to 39 million
Tibra is always a little different from the other major market makers. First of all, they represent the only significant Australian market maker – and second they have another book year for their yearly report. Their trading year ends on the 30th of June, which makes it slightly difficult to compare them with their peers. Over the year 2008/2009 Tibra performed quite well, but they had the benefit of the turbulent trading period of the second half of 2008.
The last report over 2009/2010 files a drop in the net profit with 68% to EUR 18 million. That’s quite reasonable compared with the performance of their former friends at Optiver. The trading revenue have been slightly lower than previous year, but key responsible for the drop in profits appears to be the sharply raised costs.
As all derivative traders are familiar with, there’s a legal battle going on between Optiver and Tibra with respect to intellectual property of their fast trading software. Bhandari and his friend are accused of taking the source code of Optiver’s F1 trading software with them as they walked out the door in Sydney. The only winners are a battalion of lawyers and legal advisors for both parties. Maybe they are responsible for the new loss in the income statement “service fees” amounting 29 million AUD (21 m EUR). Somehow this service fees and the administrative costs (19 m EUR) appear colossal.
More key figures. Total number of employees is 252, with on average 150k EUR income each. Trading revenue dropped with 21% from EUR 154m to 121m. Their high profile founder Dinesh “Danny” Bhandari resigned in May 2010 after four years. But that’s very old news.
Downloadable Tibra’s Financial Statement and Reports, from the Australian Securities & Investments Commission (pdf). More insight on the report can be left in the comments.
Update: Service Fees seem to be an Australian tax item, as a commenter points out (thanks). Hence the firm is a lot more profitable than at first glance. Adjusted the post title – although the truth is somewhere in the middle.
2008-09 had quiter 09 in it, so 2009-10 doesnt look all that bad in comparison to previous financial year .. in optiver’s case 2009 was getting compared to 2008 !
2010 had May in it . I’m not impressed at all especially the costs are getting quite high . And there is still the Optiver case .If they lose that one they could be in serious trouble .
Tibra has battling Optiver since about 2007, so I don’t think the “service fees” has anything to do with legal fees, especially since the 2009 number is zero. Legal fees are probably included in the “administrative costs”, and might explain the big jump there.
http://lmgtfy.com/?q=%22service+fees%22+ATO
Service fees are paid to service entities/service trusts. It used to be a common business structure for medical professionals in Australia, but has since fallen out of favour – the tax advantage is pretty minimal nowadays.
In Tibra’s case, these service entities would be owned by the traders, so you can treat the 29m AUD as if it were added on to the net profit.
@ 4:44 So this is some sort of tax avoidance scheme? What happens to shareholders who are not traders? Do they also charge “service fees” indemnifying them for an otherwise suffered reduction in payout (reduced dividend)?
“So this is some sort of tax avoidance scheme?”
It was up until the ATO clamped down on them a few years ago – they were easily abused. These days they are quite well regulated.
“What happens to shareholders who are not traders?”
Shareholders don’t provide a service, so the question doesn’t make sense.
HTH.
Re: http://lmgtfy.com/?q=%22service+fees%22+ATO
brilliant : )
Their wages and salaries are little changed YoY .. does that mean staff got similar handouts YoY .. i guess the parters took the hit in terms of dividends ?
the 50mn drop in revenues gots converted to 50mn drop in net income .. nice .. no cookie jar ..
sorry, the service charge not a real charge .. so that gets added back .. so there is 22mn lower taxes
whats the dividend revenue of 52mn in Item 16 .. and kindly dont give us “let me google that for you” bs ..
“whats the dividend revenue of 52mn in Item 16 .. and kindly dont give us “let me google that for you” bs ..”
On a consolidated level, the dividend revenue is zero so it looks like they are just internal transactions between subsidiaries and the holding company.
With the service fees taken out, their expenses went from 80m AUD in 2009 to 88m AUD in 2010. That’s 350k AUD overhead per employee.
I like a market in the feb far otm call please. 1 cent wide for 5k. Or ITM put is okay too. Thank you.
WTF is going on in Mittal?
allard is bidding the puts
wtf: spinoff. its been announced for weeks
@ 2:28
It’s about the dividend and the exploding volatility in the options, silly
somebody fucked up
Ah, somebody fucked up. Thanks for the free money dude.
Who was it? I’ve checked with all the small market makers, and I am pretty sure it wasn’t them. Maybe… All Options/IMC/Optiver/…?
hard to say but the guy has to be really stupid and unsupervised, so in a small house nobody would do 30k in the money puts, must be a big and stubborn guy 🙂
Some trading experience can be useful at times 😉
wie laat ‘m uit?
show yourself!!!
show yourself off!!! 😉
“And there is still the Optiver case .If they lose that one they could be in serious trouble”
Yeah and my marriage would be in serious trouble if I could blow myself, but it’s not very fukn likely is it?
Re: Yeah and my marriage would be in serious trouble if I could blow myself, but it’s not very fukn likely is it?
nice : )
Didnt they actually make more than Optiver and IMC in Asia ?
does the annual report give breakdown geographically, if not, its quite difficult to find this out ..
They made approx 60 mil AUD trading revenue from UK filings.
That leaves ~100 mil trading revenue in Asia. Costs are spiralling, but are still under control compared to their peers. Infact they are the only guys who have been proactive enough to shut down loss making MM spots on stock options across NL.
Do you tibra guys get paid to post on this blog ? Proactive enough blah blah blah .Face it ;you can’t make money in Europe or the USA . And to Mr wonderful marriage 10.31 . If that is what keeps your marriage working I pity your wife !The fact is that Tibra is history if they lose this case .
Finally a non tibra employee who speaks his mind !
Tibra has only gone down since it was started . a bunch of has beens .
Or simply a bunch of thieves . Who cares ?
I think what our auto-fellating wannabe is trying to say is that Optiver has virtually no chance of winning the case against Tibra. The biggest mystery for everyone involved is why Optiver haven’t just walked away – they will have to pay Tibra’s costs in the end, and the net cost of the whole episode will be in the order of $20m AUD, and a ridiculous amount of wasted time.
Yes, Tibra will be history if they lose, in the same way that Canada would be history if the USA launched a full-scale military land invasion, “but it’s not very fukn likely is it?”
Speaking of Optiver paying out large sums of money in lawsuits, what’s the latest in CFTC vs Optiver?
“what’s the latest in CFTC vs Optiver?”
For about the fifth time in the proceedings – ‘this action is stayed until February 18th 2011’. Does anyone know what the holdup is?
I can’t imagine trying to reach a fair value settlement figure would be all that hard. It’s just the price a willing but not anxious criminal would pay to a willing but not anxious regulatory authority, isn’t it?
9:48 what makes you an authority on the outcome of a civil case?
how well do you know all the evidence?
dude this blog is sponsored by tibra. you dont think the founders comment? I thought it was obvious.
if the comment is from a founder of tibra then it must be true, optiver must be wasting their time
Thay are in denial
who ? optiver ?
what do u expect them to do anything different now .. withdraw in the middle of case and walk away .. that would just not happen at this stage of proceedings .. they have come way too far to back off .. though they have some good traders .. and they are good at hacking losses .. but this is not a conventional trade .. its a law suit !
It may be a lawsuit, but it still has a quantifiable risk-reward profile.
quantifiable risk-reward profile ??!
do u work in non-market risk area ? dont believe in the lies that you are paid to go tell the management ..
on the other hand, i am feeling bored, humour me with your quantitative analysis of the risk and reward ..
Fucking this fucking that very impressive and very convincing .
Not .Tibra has a big problem if they lose the case . A lot of swearing won’t help you . Neither will divorcing you’re sorry wife btw .
It is “fucking likely” that a tibrabrownnoser will react within 15 min though .
“humour me with your quantitative analysis of the risk and reward”
I’ll have a crack!
C = legal costs that will be incurred by both parties from now to the end
D = damages awarded in the case of an Optiver win
w = The probability of an outcome where Optiver are awarded damages
EV(w) = P(w) * (C + D)
EV(~w) = P(1 – w) * C
EV(w) needs to be significantly greater than EV(~w) to cover the cost of intangibles like people’s time, otherwise they should walk away.
C & D are variables as well douchebag. Probably correlated.
So what will you do? Assume a statistical distribution? Ok lets assume a common insurance loss distribution such as the Weibull.
Now you have a few more unknown parameters. How will you fit these? Maximum likelihood? Cool. Now you reach into your database of past lawsuits involving 2 marketmakers…
or you could just auto fellate yourself.
“C & D are variables as well douchebag.”
I’m not writing my doctoral dissertation on the topic – I’m just showing that there is a quantifiable decision to be made based on the best information you have.
Your argument was that “they’ve come this far” which is a crap argument – sunk costs are sunk costs ..
that wasn’t me. I weighed in when u tried to be clever.
I’m not the self-sucker either.
i know. but i learnt a new word today and I’m trying to get familiar with it.
one thing is certain – any one who reads or chats on this blog would have no idea as to the likely outcome of the tibra/optiver case
how do you come to that conclusion?
Re: C = legal costs that will be incurred by both parties from now to the end
D = damages awarded in the case of an Optiver win
w = The probability of an outcome where Optiver are awarded damages
EV(w) = P(w) * (C + D)
EV(~w) = P(1 – w) * C
EV(w) needs to be significantly greater than EV(~w) to cover the cost of intangibles like people’s time, otherwise they should walk away.
Ans –
C ….. is unknown … unless ofcourse it was a moron like you making a wild guess ..
D …is unknown … unless ofcourse it was a clueless risk analyst like you making a wild guess ..
w.. is very definitely unknown .. man, even a douchebag like you wouldnt put a number to it ..
EV(w) & EV(~w) .. well C, D, w are all unknowns .. but u are a smart guy .. u’ll still be able to present credible numbers ..
All of the above reminds me of option pricing .. there’s no way you can know realized volatility.. but yet you are so comfortable putting a fair value to it .. mindblowing ..
Re: Your argument was that “they’ve come this far” which is a crap argument – sunk costs are sunk costs ..
Hallo .. let me tell you abt the real world .. historical cost shouldnt be included NPV .. of course .. everybody knows that .. but ever heard of behavioural finance .. how irrational people can be when making decisions of this nature .. how organizations keep taking wrong decisions just because there is wrong leader like den drijver sitting at the top ..
well i think u could quantify the risk reward of choosing one CEO over another .. ur so smart ..
anonymous is right.
Current score:
anonymous: 1, anonymous: 0.
LOL !?!
i second that, anonymous…
As for anonymous – well said.
That anonymous really is a douchebag. If anonymous did try to autofellate, I’m sure anonymous would lend a helping hand.
yours truly,
anonymous.
LOL !??!
http://www.brisbanetimes.com.au/business/cash-windfall-for-tibra-trio-as-they-take-time-out-20110206-1aid1.html
“The latest accounts show a small provision for the pending court action.”
No they don’t. Pg 38 of the annual report lists the provisions, and they have $16m of employee benefits put aside to pay bonuses. There are “other” provisions of $83k.
Journalists are hopeless.
Great success story guys…!!! you deserve the good press.
Tibra is sometimes described as a high frequency trading firm. If they’re HF why do they need so many human traders? I thought that HF was about fully automated trading at speeds that humans can’t match.
Oud-handelaren van ABN krijgen duwtje in de rug en beginnen voor zichzelf
30 maart 2011 | Het Financieele Dagblad
Door: Jonker, S.
Drie ABN’ers die voor eigen rekening van de bank handelden, zagen het einde van hun handelsdesk aankomen toen RBS die overnam. Ze stapten op en begonnen met een oud-collega een hedgefonds in convertible arbitrage.
Click here to find out more!
Saskia Jonker
Amsterdam
Het gaf ze het nodige duwtje in de rug: de overname van hun handelsdesk door het Britse RBS zorgde ervoor dat de drie ABN-handelaren opstapten en eindelijk voor zichzelf begonnen. Eerder lukte ze dat niet. ‘Het is niet makkelijk om als het goed gaat voor jezelf te beginnen’, zegt Ramon Heusen.
Maar de handelaren zagen in 2009 al dat het einde van ‘prop desks’, de afdelingen die voor eigen rekening en risico van de bank handelen, in zicht was. Ook bij ABN Amro en RBS, merkten ze. De afdelingen die ooit miljarden verdienden voor banken, kregen deels de schuld van de crisis. In de VS werd het banken daarom verboden nog langer voor eigen rekening te handelen, in Europa hebben banken de desks uit eigen beweging grotendeels afgebouwd. De handelaren beginnen vaak voor zichzelf.
Ramon Heusen, Wilrik Sinia en Marcel Voogel zijn de eerste Nederlandse handelaren die deze trend volgen. Ze hebben samen met oud-collega Joris Hoedemaekers Mint Tower opgericht en zitten sinds eind vorig jaar in een ruimte van het beursgebouw van NYSE Euronext. Net als bij veel startende fondsen draait het nu vooral om geld ophalen. Daarom is Pim Bertens er als partner bij gekomen. Hij is een van de oprichters van internetbank Binck.
Maar het gaat niet makkelijk. Hoewel ze jarenlang bij ABN hebben bewezen dat ze geld kunnen verdienen met hun strategie, is dat niet genoeg om bij grote beleggers als pensioenfondsen binnen te komen. Die willen een trackrecord zien. Daarom richten ze zich dit jaar vooral op vrienden en familie. Daarna gaan ze de family offices af. ‘We hebben jaren gehandeld’, zegt Heusen. ‘We weten dus wat het is om winst of verlies te nemen, dat maakt ons niet nerveus.’
Het maakt het lastig dat veel beleggers niet begrijpen wat voor strategie het fonds volgt. Dat is ‘convertible arbitrage’, waarbij het fonds converteerbare obligaties koopt. Dat zijn obligaties die op een gegeven moment verplicht worden omgezet in aandelen. De aankoop van die obligaties wordt grotendeels gefinancierd met het verkopen van aandelen in het betreffende bedrijf op de beurs (short gaan). Daarnaast dekt het fonds het kredietrisico op die obligaties af met opties. Mint Tower verdient geld aan de eventuele verschillen die tussen die drie markten bestaan.
In de VS volgen verscheidene fondsen deze strategie, maar in Nederland deden voorheen alleen banken het. ‘Dat die banken daarmee gestopt zijn, is gunstig voor ons’, zegt Hoedemaekers. ‘Er zijn daardoor meer inefficiënties in de markt en de winstmarges zijn groter.’
Voor de kredietcrisis waren er zo veel spelers in de markt voor converteerbare obligaties dat er bijna geen onvolkomenheden meer waren waar geld aan verdiend kon worden. Nu zien de handelaren van Mint Tower kansen, ook omdat naar verwachting bedrijven dit jaar meer converteerbare obligaties uitgeven. Ze mikken op een jaarlijks rendement van minimaal 10%, na aftrek van de beheersvergoeding van 1,8% en prestatiefee van 20%. Ze hebben binnen drie maanden euro 20 mln opgehaald. Hoedemakers: ‘Maar het is pas een succes als we tussen de euro 50 mln en euro 100 mln hebben opgehaald.’
Hoewel ze jarenlang bij ABN hebben bewezen dat ze geld kunnen verdienen met hun strategie …
‘We weten dus wat het is om winst of verlies te nemen, dat maakt ons niet nerveus.’
These guy’s could lend money against eonia+nothing at ABN-AMRO/RBS
they bought shitloads of conversions in high-dividend paying stocks
and then they just laid-back
how cool is that?!
free money
‘I thought that HF was about fully automated trading at speeds that humans can’t match.’
it doesnt need to be fully automated, as long as the speed of algos/execution is among the fastest .. how stupid are you,
‘Ramon Heusen, Wilrik Sinia en Marcel Voogel zijn de eerste Nederlandse handelaren die deze trend volgen. ‘
havent those guys from Hi-Q Invest left their bank trading position to start a fund .. its definitely not a first !
‘how cool is that?!
free money’
yah thats how Fed bailed out banks, lending to them at zero and letting them earn whatever by lending all that cash ..
10:31am yes of course this isn’t a first.
Hi-Q Invest got SLAUGHTERED (Volkswagen) back in September 2008 (weeks before the really big move to 1.000 euros), losing some 30% of their assets in two days (60% if you account for the fact that half were/are kept in bonds). Their “market neutral” fund nearly imploded, and they quickly abandoned their high watermark performance fee restrictions to stay afloat (no pun intended). I think that IS a first for the hedge fund industry! By their own estimate, Hi-Q had expected to have 10 times the current AUM (around 20m). By comparison, that is less than these ABN guys amassed in just two months. But unless either of them grow to several hundred millions under mngmt, it is doubtful we will read about them in the newspaper outside of paid advertisements.
‘they quickly abandoned their high watermark performance fee restrictions ‘
can you change the contract clause .. why would investor agree to this change ?
‘quickly abandoned their high watermark performance fee restrictions to stay afloat (no pun intended). ‘
if you intended, what wud have been pun ? abandoning high watermark to stay afloat ??!
‘current AUM (around 20m). ‘
so 2% of that is 400k and 10% average returns and 20% cut of it means another 2%, so another 400k .. that doesnt sound much ?
you would need 100mn fund with 10% average returns ?
it’s not much if you have ten mouths to feed (headcount at HiQ)
http://www.hiqinvest.nl/scorecard_mnf.php
up 78.5% in 3.5 years, it was flat for first 1.5 years thanks to lehman bankruptcy, so not average returns, also performance cut is 30%,
Gijs & Niels were like we have fully automated trading system, wonder if they shag each other the rest of the time .. with 10 people does it make any sense to fully automate it given the high fixed cost attached to fully automate it .. if the scale was there, making it fully automated would be worthwhile, but 10 people, there should be enough opportunities to capitalize on that rather than wasting time automating for opportunities which might get arbed away pretty soon,
they should have made a killing thanks to lehman … but actually as the other poster correctly pointed out, they lost big time on the vw spread, their loss had little to do with lehman (but it makes for a convenient excuse). -18% in one day for a neutral fund, that’s utter annihilation.
the % return is somewhat misleading given the small size of their fund. can they scale their profits if they add assets under mgmt?
‘their loss had little to do with lehman’
ur stupid, its not likely they were long LB and short GS, but obv in stressful situation like LB bankruptcy, the spreads start to go extreme and not come back at all for quite some time .. this has everything to do with lehman going down and resulting spreads going against them massively .. this happened big time in LTCM bankruptcy ..
‘can they scale their profits if they add assets under mgmt?’
ur really stupid, is that question for real? market making and arbitrage is pretty much about volumes and execution alpha .. its not like investing in Facebook or punting on Gold ..
5.26pm good god, it’s the ebonics moron again who knows it all.
the development of the vw spread in september and october 2008 has nothing to do with the lehman bankruptcy. it had everything to do with porsche increasing their stake in the company. for you to even suggest that the vw movements were related to the lehman collapse … that’s bad even by your standards. it sounds like you were one of the investors in the hi-q fund who bought their “blame it on lehman, we did well” excuses. i guess you also lost money in 2008 and blame lehman?
as for your 6:17 pm post, looks like a rhetorical question to me … look it up in the dictionary jabroni.
I made good money thanks to the Lehman demise, the guy-who-can’t-spell must have lost money in light of his profound stupidity.
Still a zero sum game.
But in this case – 2008 – the party on the wrong side of the zero sum game was mostly the taxpayer.
‘the development of the vw spread in september and october 2008 has nothing to do with the lehman bankruptcy.’
i of course dont know it all, as this proves !
‘i guess you also lost money in 2008 and blame lehman’
no i just blame myself .. blaming others is for losers like u ..
‘as for your 6:17 pm post, looks like a rhetorical question to me …’
looks like ?!
‘Still a zero sum game.’
in very short run yes, in long run no,
‘the party on the wrong side of the zero sum game was mostly the taxpayer.’
not just the taxpayer, but also the saver has been bailing out thru inflation, zero interest rate lending to banks
‘I made good money thanks to the Lehman demise’
good you should give urself a blowjob, ur special one, suck urself well,
‘‘the development of the vw spread in september and october 2008 has nothing to do with the lehman bankruptcy.’’
no sorry, i of course know the Vow story .. shudnt be drinking on wed night .. is that where HiQ lost 60% of invested capital .. thats stupid .. i wud expect that from Mr Pneuman, not the actual arb people themselves .. the good old short queeze.. in this case, mother of all short squeezes ..
@ 10.09 pm
if a property (“zero sum game”) necessarily – always – exists in the short run, as per your admission, then by extension it must also hold in the long run. after all, a long run is just a bunch of successive short runs.
clearly this is too difficult for you to understand?
@ 10:18 you seem to be drunk 24/7 … not just wed night
@10.11pm
My back is not flexible enough to fully execute your advise, please tell me what do to next cause your advise still seems really attractive.
u should hook up with this chick. she’d be impressed with your bravado.
http://www.youtube.com/watch?v=eLYbDg242EY&feature=related
‘a long run is just a bunch of successive short runs. ‘
still not getting the big picture are you; behind your stupid equity trades are real companies making real products and generating real earnings, in long run its not just you and me being zero sum, the investment returns of your holding comes into picture, how stupid are you that this still doesnt go to ur dumb head,
‘ 10:18 you seem to be drunk 24/7 ‘
beats being stupid dick weed and blowing urself off for all your winning zero sum trades,
derivatives are a zero sum game
‘My back is not flexible enough to fully execute your advise’
too bad, ask your buddy to do 69 with you and when you have his dick in your mouth try to imagine that its yours .. i know yours is so small it be hard for you to imagine, but you know its good to have a break into dreamworld sometime ..
‘derivatives are a zero sum game’
and you are stupid,
You and I bet on the outcome of a coin toss. My gain is your loss: Zero sum game.
You and I enter into a futures contract. Your loss is my gain (less leakage via exchange comm): Zero sum game.
Please get a clue.
Am I the only one who noticed the obvious flaws in the mint tower article? If I was one of the owners I would be VERY pissed off with this journalist.
I believe you dutchies call this ‘riool jornalistiek’ … Not sure if I got the context entirely correct but you get the idea
You and I enter into a futures contract. Your loss is my gain (less leakage via exchange comm): Zero sum game.
what if i am an arb guy and hedge it at better levels in the cash market ? what a moron you are >>!!
comparing coin toss casino gambling with stock markets .. you got to be most clueless person in the markets, thank god for douchebags like you ..
‘Am I the only one who noticed the obvious flaws in the mint tower article?’
can you elaborate more on whats the flaw you are seeing ?
1:37 then your gain is the loss of your counterparty in the cash market trade … still a zero sum game
ok, to end this debate for once and for all I will give you two lovebirds some economic theory …..
Shares are wealth creating instruments. They transfer value from other parts of the economy into the stock market and/or create wealth on their own (internet companies ;). Shares are therefore NOT part of a zero sum game. To illustrate this just look at the graph of the main stock indices of the last few 100 years. If trading shares was a zero sum game these graphs should be flat, but they are not.
Derivatives however, both futures and options, seen ON THEIR OWN, are a zero sum game. There are opening and closing transactions meaning that every buyer has a seller as a counterparty and maturity these contract seize to exist. No new economic wealth is created.
Combining the two creates a non zero-sum game, since the wealth creating shares are part of the equation. Volatility trading is therefore not a zero sum game, so both the omnipotent non-dutch trading firms with their directional volatility punts and the penny squeezing dutch market makers can both make money at the same time.
Just get a university text book on financial markets and you will see this same story, just written down a bit more elaborate.
P.S. a different tone in debating would suit both of you and would make it much more fun to read.
‘ then your gain is the loss of your counterparty in the cash market trade … still a zero sum game’
what if there is no actual counterparty in the cash market, its just a company issuing shares, then that company turns out to be Google who is delivering real good service to its customers, users and generating cash flows for the investor/arb guy .. still zero sum ? no, because of consumer surplus .. read abt it .. you might finally see the light at the end of the tunnel you live in ..
http://en.wikipedia.org/wiki/Economic_surplus
‘Derivatives however, both futures and options, seen ON THEIR OWN, are a zero sum game. ‘
on a leveraged basis/short term, these are valid zero sum .. thats coz the company sitting behind the bet can’t generate economic profits in short run .. now in long run, company generates profits and whoever is long either through cash or derivatives gain .. you might think the dealer who has short position might lose, but dealers in general are hedged, so you can equate future and option positions as delta one/leveraged punt on stock .. rather than buying the stock, they derive leverage thru derivatives, but they are still punting on the underlying company to do well and at the cost of bid-offer spread, the dealer allows them to punt on that company ..
man i cant believe you dont see the big picture in the long run .. seems both of you are short term market makers and have difficulty in taking ten steps back from daily mtm ..
PS – mostly derivatives are short term leveraged bets, so almost all of them is zero sum and casino gambling .. the long term derivatives are not liquid enough .. investors prefer cash markets for long term economic bets .. i think CDS are probably the best eg of zero sum derivatives though not completely sure, having never traded credit,
“Shares are therefore NOT part of a zero sum game. To illustrate this just look at the graph of the main stock indices of the last few 100 years. If trading shares was a zero sum game these graphs should be flat, but they are not.”
For starters, there were no “main stock indices” 200 hundred years ago. DJIA and DJ Transportation Average are the oldest indices (1884).
The main stock indices do not reflect the entire market, where companies come (IPO) and go (bankruptcy) and participants come and go. You will not find any of the companies that went out of business in the 19th or 20th century in today’s DJIA/S&P. For example, only 5 of today’s 30 DJIA constituents were already in the index before 1975. (Which is not to say all others have perished, but AIG is a prime example of a recent drop-out.) If my great great great grandfather had kept all of his railroad company shares from 1884 … the only place you can sell them is on eBay.
Your error is a common mistake:
http://en.wikipedia.org/wiki/Survivorship_bias
I will not deny that certain participants can structurally make money, like the two groups you mentioned. That was not debated. That is just the observation that other (end) investors pick up the tab for their profits (rather obvious in the case of a MM earning the spread). It remains a zero sum game across ALL participants, the success of certain individuals notwithstanding.
“volatility trading is not a zero sum game”
what about options written on futures?
@10:27 You are totally missing the point. Being an experienced quant trader (not a short term options mm) I am very aware of survivership bias etc. ‘Main indices’ is a concept here to illustrate another concept, and the fact they didn’t exist for that long does not matter.
The real issue is the fact that shares are wealth creating instruments and that any trading involving shares is not zero-sum. You yourself are illustrating my point by mentioning IPO’s. Wealth created from nothing. If Steve Jobs were to start a new company (if he recovers of course) then that company would very likely be worth more than its intrinsic value, thereby creating new wealth. People buying this company at the IPO will not lose that wealth instantenously, thereby disproving your zero-sum argument (Steve Jobs makes money, nobody loses money). If you don’t agree, please enlighten me who loses out here?
@2:47 I don’t understand your reasoning. Can you please rephrase your argument?
@10:49 options on futures are a zero-sum game (zsg + zsg = zsg)
‘what about options written on futures?’
those are delta hedged using futures, which in turn are hedged using cash .. so underlying exposure remains, only leverage comes in .. derivatives are heavily used to get around taxes, rules and regulations and of course for cheaper leverage ..
‘there were no “main stock indices” 200 hundred years ago’
redundant arguement, stick to the main point of focus rather more and more blabbering ..
‘Your error is a common mistake:
http://en.wikipedia.org/wiki/Survivorship_bias‘
How stupid are you .. when GM was kicked out of DJIA during its fall, did you still keep it all along its fall to complete zero ? when the company is kicked out, you just switch to whichever is the new component so that exposure to DJIA companies are maintained, not the original DJIA stocks you brought in 1900 .. what a muppet you are ..
‘It remains a zero sum game across ALL participants, the success of certain individuals notwithstanding.’
those participants include producers and consumers, what about producer surplus and consumer surplus .. we can ignore that for sake of simplicity and your stupidity ?
http://en.wikipedia.org/wiki/Economic_surplus
‘@2:47 I don’t understand your reasoning. Can you please rephrase your argument?’
which part you want me to repharse ?
‘@10:49 options on futures are a zero-sum game (zsg + zsg = zsg)’
you are definitely a quant trader .. and missing a key point about derivatives to go with .. ‘options on futures are delta hedged using futures, which in turn are hedged using cash .. so underlying exposure to cash remains, only leverage comes in .. derivatives are heavily used to get around taxes, rules and regulations and of course for cheaper leverage .. but they are still punt on underlying index .. not thru cash but thru derivatives .. ‘
@ 9:51 the whole argument please, it doesn’t make sense what you wrote and your point is not clear.
@ 9:54 please reread what I wrote, derivatives ON THEIR OWN! so without the cash component. If you include the cash component is seizes to be a zero-sum game. So we both agree on this I think? The reasons why derivatives are used is irrelevant for the discussion.
P.S. I traded options & futures for many years as well.
”@ 9:51 the whole argument please, it doesn’t make sense what you wrote and your point is not clear.
i’ll give another go at this ..
‘Derivatives however, both futures and options, seen ON THEIR OWN, are a zero sum game. ‘
on a leveraged basis in short term, these are zero sum game because the company sitting behind the bet can’t generate economic profits in short run.. only the long and short are in the game and so its zero sum .. now in long run, company generates profits and whoever is long either through cash or derivatives gain .. you might think the short position might lose, but if you take the bigger picture, short position is effectively by the company selling its equity to raise funding .. so you can equate future and option positions as delta one/leveraged punt on stock .. rather than buying the stock, they derive leverage thru derivatives, but they are still punting on the underlying company to do well and at the cost of bid-offer spread, the dealer allows them to punt on that company ..
you’ll be stupid to think that investor’s gain is company’s loss just because company sold it shares to the investor ..
‘derivatives ON THEIR OWN!’
derivatives on its own doesnt exist outside of casino or equivalent of casinos ! certainly not in legit financial markets !
‘P.S. I traded options & futures for many years as well.’
you dont need to present your credentials, its irrelevant for the discussion… its equivalent to small dick traders who come and complaint that people should stop debating and instead look and wonder at his biggest P&L and smallest dick ..
‘ The reasons why derivatives are used is irrelevant for the discussion.’
maybe not directly, but since people are missing the bigger picture about derivatives, its better to get that big picture right.. why derivatives were invented, what purpose they serve and how they are not always fucking zero sum ..
@11:08 We are arguing about the theoretical concept of a zero-sum game. I can make any valid assumptions I want to prove my theory. Of course in practice this ‘on their own’ distinction does not exist, but that is not relevant for the discussion. Conceptual it is a valid argument.
@ 11:06 you are still difficult to follow because you are mentioning things like short/long term issues that are not relevant, but from what I can understand you are exactly saying what I am saying. On their own, zero sum game, including cash not.
striking btw that every time your answer precedes the other anonymous by two mins. Are you the same anonymous? If so, let’s merge the discussions into one.
‘We are arguing about the theoretical concept of a zero-sum game. ‘
we are not arguing about any theoretical concept .. the use of derivatives is as practical as it gets .. you are welcome to go back to your theoretical world but kindly go there by yourself and dont drag others over there .. its waste of time ..
‘let’s merge the discussions into one.’
no let’s end the stupid discussion and the reader can decide on himself who is correct ..
Can we just put an end to this pissing contest? No one gives a shit.
‘short/long term issues that are not relevant,’
they are relevant because its fucking more zero sum in short run and fucking less zero sum in long run .. peace ..
so there is a point in time, between the short run and the long run when a futures trade changes from being a zero sum game to a non-zero sum game?
Must be some magical temporal distinction. Great argumentation bro.
I agree with the 12:13 brothers. It is totally pointless to argue with these anonymouses who obviously didn’t get any education beyond high school level, so I rest my case. All readers can decide for themselves. Next topic pls, i got one:
I just saw a SIX exchange notice that All Options joined SIX as a new member. Other members can look forward to making some extra bucks soon. AO is expanding again!! Any comments or insights or better topics?
‘so there is a point in time, between the short run and the long run when a futures trade changes from being a zero sum game to a non-zero sum game?’
yes when the company/stock, on which the derivatives is punting, start generating economic profits .. talk about stupid derivatives trader thinking that derivatives is complete casino zero sum gambling .. no wonder general public think its all zero sum casino banking where the bankers bonuses are coming out of general publc all the time .. most of the time, probably; all the time, no fucking way ..
such a boring day …
I’m glad that I spent it with you
good its time for climax, point it straight towards the back of your throat .. dont miss and swallow everything, it be good for you,
‘http://www.six-swiss-exchange.com/swx_messages/online/swx_message_201104011415_en.pdf’
so all options were not trading CS, UBS, Zurich Financial on main listings ??!
‘http://www.six-swiss-exchange.com/swx_messages/online/swx_message_201104011415_en.pdf’
so all options were not trading CS, UBS, Zurich Financial on main listings ??!
Until recently, All Options Helvetia – the Swiss branch- did trade on the primary exchange. Check out the member list of the exchange…
http://www.six-swiss-exchange.com/participants/participation/types/participant/list_en.html
Hardly “news”. AO had been trading the Swiss market out of their Swiss office (a seperate legal entity that had the membership). Now that the Swiss office is about to be shut down, the Amsterdam operations continue under their own, newly acquired membership. Nothing changes.
how many employess currently at AO ?
‘u should hook up with this chick. she’d be impressed with your bravado’
are you that chick ??! man, oh sorry, woman, you dont need to talk abt urself in third person .. its okay to say it out loud who or in ur case, what you are .. people would understand .. trust ..
AO HK closed down and they are continuing operations in Asia through their Netherlands office…
Anyone know other prop trading firms based in Europe without offices in Asia trading Asia? I’d be veeeeeeeery happy if anyone answered this last question 😀