My 1st Trade

The Green Album

They say they never really miss you 'til you dead or you gone
So on that note I'm leavin after this song
See you ain't gotta feel no way about [Ven] so long
At least let me tell you why I'm this way, hold on

Since the last post, I haven’t been doing all that much other than hitting golf balls and watching baseball. Not because I’m quiet quitting or anything, but when you catch a generational bottom, all you really need to do is let the market do its work. Since August 2024, I’ve spent all my energy trying to wait for that bottom — and, as evidenced by the last post, I got it to the second. 9 months of nonstop scrolling with a 10 sigma reading speed and not sleeping, all to be perfectly positioned to buy anything and everything when the 7 is rolled on the volatility craps table. Well, I’m finally done.

I started trading in 2014 after my inevitable scrolling through /biz/ and r/wallstreetbets piqued my curiosity just enough to try it out with my own money.

The first stock I ever bought was JBLU. I would check the price every single day, and I wondered why the share price would move in real time when everyone would trade around the news.

I learned just like everyone else did who got into trading during the 2021 retail mania market — I read WSB nonstop, hung out in the chatrooms, tried out the ideas I liked myself, and shared my own. I would share my ideas with my dad, who was confined to a LA-Z-BOY chair at that time, and he wouldn’t encourage all that much, but I suspect he traded on at least a few of them.

Back then, they weren’t called “memecoins”, they were called small cap biotechs. Stuff that would wildly swing around on the sentiment of retail punters on message boards, because that was the only place volatility existed in the market. I remember making (to me, back then) a fortune off of names like RLYP and AVXL, and dodging obvious garbage like BGMD. When I check in with my old WSB friends, some of them are still holding this crap, somehow. I remember the old posts about JMIA, the Amazon of Africa, SUNE before it went to SUNEQ, and when Su Bae was a meme about a stock trading at 2/share. One of my biggest current-day post-election winners, FNMAS, is a trade I originally found from WSB posts in 2016, a trade favored by none other than Bill Ackman. I taught myself admin law to figure out what exactly was going on with the conservatorship — I became convinced law is meaningless when I saw the result of Collins v. Yellen, among other things. There are so many ways to make money in the market that it’s imprudent to write retail off as “dumb money”, which doesn’t exist anymore. The term is meaningless.

If you look at my nonexistent resume, it doesn’t seem real that I have as much institutional knowledge as I purport to have. But something that is necessary to understand is that “institutional trading” didn’t really exist for anyone trying to get into finance post-2010. Dodd Frank neutered everything that made the insane game of high stakes poker fun prior. Accordingly, I would walk into my MM final round interviews and boldly proclaim that their business would go under if they didn’t start taking delta risk. It seemed obvious — if everyone is competing for flow, and there’s no flow, how do you possibly make money? A VIX of 13 and a market driven by passive inflows means there’s no spreads to capture, and the pithy state of trading from 2010-2018 reflected this. Market-making profit is a fixed pool, and when times are good, firms open up. When times are bad, they compress — it’s fundamentally a sell-side service, and that’s probably how Citadel and Virtu came to rule flow. They were just better capitalized than everyone else to wait it out.

I was right, of course, but now I realize that there’s a time and place for my thoughts (it’s on my blog after I’m already financially secure). Nobody is extending offers to someone with no experience (whatever that means) who tells them the sky is falling, but I maintain that I was spot-on in my assessment. It took a global pandemic to induce trading volume again, and my dumbest conspiracy about COVID is that that was the plan all along — markets got too passive, and all the infra was fiscally unsustainable, so what do you do? Lock everyone inside, give them paychecks they didn’t earn, and get them hooked on trading. It is addicting in the worst way possible — I can’t begin to recount the amount of sleepless nights I’ve had watching and pointlessly trading futures, or the number of times I’ve dreamed about stock movement in the little sleep I do get.

Trading undoubtedly induces adrenaline when you have a position in it. Stocks don’t have enough leverage to induce the thrill that a volatile options trade might. But the downside to an adrenaline-inducing activity is it can get addictive fast, especially when you have products like crypto or futures that trade around-the-clock. You find yourself chasing that hit of an 80 VIX like a Red Bull sponsored skier chases that god run from the pristine mountain peak. I myself have fallen prey to this — for a 3 month period in 2017, I would wake up at 4:30 to trade the KC open, then the CL open, have some breakfast before the regular markets opened, trade until close, sleep for a couple hours/go to happy hour or dinner, and then trade the night session until sleeping for another couple hours pre-KC open. It was almost standard to be watching markets 17 hours a day. This is why the goal of every manual trader is automation, because that way you don’t have to worry about the fact that you might miss a trade due to human concerns like, well, life.

So when I see articles like this, I totally sympathize, even though crypto addiction is decidedly a lower-rung societal problem:

In the circle of a therapy session in an 18th century Scottish country house are half-a-dozen recovering addicts. Many recall, at their lowest points, battling chronic depression and contemplating suicide. The patients, all male, share harrowing stories of dealing with a newfangled addiction: compulsive crypto trading. Some say their crypto addiction combined with an alcohol or drug habit, while others say they began by treating trading digital tokens much like gambling. “I spent eight hours a day on Reddit reading [crypto] white papers, thinking I’m making an intellectual decision . . . it was just ridiculous,” said one patient.

I “built” my institutional experience by, of course, faking it until I made it — I would obsessively read Money Stuff and launder its ideas and my own trading insights through conversations in New York bars 300 nights a year to acquire as much information from people who were there when it was good. I kept hitting on the same vibe over and over again from the highest signal individuals — zero interest rates didn’t work, and the financial system had collapsed in 2008. Any fiscal reality and prudent governance was drowned out by the fact that the Fed controlled everything. It was just a question of when the illusion would inevitably break.

If you are a doomer, and I frequently claim I am, the proper trading strategy is to be aggressively bullish. Betting on the downside is dependent on luck, and is fundamentally antisocial. This is (partly) why I hate Michael Lewis and the big short, and what tech people don’t understand — getting rich quick is also antisocial. Wealth must be earned, and cashing out when the facade gets eviscerated (and, let’s be clear, most wealth is a facade) leaves a bad taste in everyone’s mouth. Everyone with a brain saw it coming, but they tried to stem the panic, because shorting is a self fulfilling prophecy. Markets don’t crash due to sellers overwhelming buyers, but complete lack of bid — aka no liquidity in the underlying. That’s what “don’t dance” means, that Brad Pitt was saying. Making money betting on big crashes is like making money on a crypto rug. You’ve won, but at what cost? You’ve ostracized yourself from the rest of the decent world. Shorting is, indeed, unamerican. Like a don’t pass line bet, it’s more fun when everyone is winning at the craps table, you know? But that’s the market — there’s so many ways to make money that the worst kind of anti-American haters can make money betting against the optimism of the Trumpentariat. It has to reflect sentiment just like information asymmetry has to be profitable. You cannot have an amorphous, passive, collectivist blob driving investment. It’s fundamentally marxist, and markets aren’t oriented that way.

The past couple months have fully revealed who is a jaded nihilist and who is cynical. Inherent in every deeply cynical individual like myself is a startlingly clear-eyed optimism, in that I do think there is a way to fix these horribly broken systems people see glimpses of all over the place. I don’t have the energy to deal with depressed nihilists anymore, and taking the other side of their bets requires reading their idiotic thoughts over and over again to time the market. I do think It’s Different this time — we have the tech to push past the bounds of the faulty, spaghetti-code human operating system driven by people pulling levers they don’t understand the intuition behind. But someone has to explain how this works, who sees the entire system in their own head, and I think that’s something I can do.

Part of me feels like I’m an athlete retiring nowadays. I’ve spent over 10 years of my life obsessively figuring out how this all works, and honestly, I think I have nothing left to prove. If it’s not clear, the “trading cycle” lasts from Sunday night 60 VIX print (Yen Carry Trade was the last one) to Sunday night 60 VIX print (“Liberation Day”). That’s when you get time to dynamically place bets on the craps table for the next cycle, and when markets actually move. I didn’t make a single trade from the beginning of 2022 to mid 2024, because there wasn’t any reason to. But when the iron is hot, you have to strike, and when I saw the bat signal flare in August, I dropped everything to trade and take the market behind a shed one last time.

Across the 4 strategies I run, I crushed the market by well over 20 points on a significantly lower-risk basis than just holding SPY. It robbed me of all the health that I had built to maintain in the prior two years — when the tariff pause news came out, I was literally getting a physical. Nine months of McDonald’s, instant noodles, nonstop travel, not sleeping, and Coors Light gave me the literal worst health reading of my life, and then I got my blood pressure and heartrate measured while the market was surging 10% to boot. My resting heart rate was around 110, and fluctuated between 90-115 over the course of the reading, and my systolic BP was in the 150s. There’s truly no high better than getting it right.

What I do is quite simple — I’ve been writing about it since the first Malt Liquidity all those years ago.

A common aphorism in saving for the average person is to “passively invest” - rather than trying to actively “beat” the market measure of your choice, the suggestion is to buy market-tracking ETFs, such as SPY, which tracks the S&P 500. However, if the S&P 500 is adding and subtracting companies to its index composition, isn’t that, technically speaking, an “actively managed fund”?

This has been discussed at length on various other sites, but the particular chaos surrounding Tesla's addition to the S&P 500 adds weight to the argument that, well, if you’re adding a company that’s supposed to be the sixth-largest component of your index in a way to deaden the impact to ETF providers, isn’t this sort of active management?

It’s useful to look at financial markets from a standpoint similar to Newton’s Third Law - for every movement in a financial product, there is a product tied to it that will adjust accordingly (though not “equal and opposite” - there are far too many products built on top of products with non-linear relations for anything in finance to be this simplistic.) As such, the addition of Tesla to the S&P 500 would impact every ETF tracking the index, the futures tied to the index, the options on all these theoretically - identically moving products, the volatility measures on the index that are traded, the options on those, and so forth, due to the fact that while everything is priced according to the index, the actual shares making up the ETF must be held somewhere in the weights corresponding to S&P’s weights. Generally speaking, ETF rebalancing is a humdrum occurrence at the end of every trading day - however, Tesla is a fairly illiquid and extremely volatile stock which also requires large amounts of collateral to trade, given its weighting and market capitalization. Thus the problem arises of everyone knowing that all these ETFs do, in fact, have to buy the shares in some form, and, naturally, taking the liquidity currently being provided to front-run all the big asset managers buying it. You see this happen occasionally when products roll over or terminate - the negative oil fiasco earlier in the year was explicitly compounded due to USO’s rollover schedule being public knowledge - but Tesla split just a few months ago which one would assume made the stock more liquid, but is actually not so clear.

What does this all mean? There’s no way to conclude anything, really. Since S&P announced Tesla’s addition on November 16th, the stock is up 40% - while not directly attributable to the announcement, it is safe to say there was a pretty significant impact on the share price, along with a piling-on enthusiasm that may or may not have been motivated by front-running ETF providers. Announcements and additions that impact market prices… doesn’t sound like passive management to me.

The latest addition of COIN is just further proof of the theory that markets are too passive and there aren’t enough large cap stocks with sufficient liquidity for allocation. This is a problem for Blackrock, but not for us with mere mortal sums of money in our brokerage accounts.

All I do is pick the stocks that I know have to move the index as my exposure to equities, and dynamically adjust the exposure to the highest beta, highest weighted stocks. I included the returns screenshot above because it should be very obvious where I held TSLA and where I didn’t. As such, pretty much all of long-equities trading is either having exposure to both TSLA and NVDA, one and not the other, or neither. And, of course, I never use any leverage, and run at most a .7 beta. I don’t think my ungodly sense of timing is replicable, but I think it’s pretty easy to figure out when to risk-off:

It’s important to understand the concept of “the algorithm” that I introduced last post:

There is an algorithm that ebbs and flows around the American workday that controls what everyone who logs on to some form of media or another will see within 4 hours to 6 days. Depending on the form of media, the frequency with which you see things will imply different things about the signal and actionability of what is being pushed. How well you have curated your mediums of choice alters how you take advantage of it — if you understand X very well, you have a head start on doing things, while if you understand how things break containment into regular news, you have a far greater ability to sit on your hands and operate on a “nothing ever happens” wavelength, as so frequently happens. As Deepseek so beautifully put it, the velocity of the flow is dependent on the collective inability of society to stop checking their phones.

This algorithm is not something that’s just coded up — it’s metaphysical, the collective machinations of everyone involved in the post/scroll/share/react timeline.

When people with no assets are citing idiot economist columnists as to why a macro policy is objectively bad, the algorithm has reached max saturation. There is nobody left to panic. This is why Tim Walz, a man who has never owned a stock in his life, is also an obvious fade whenever he starts crowing about stock prices. Everyone has sold by the time those people start paying attention, and the path of least resistance is always with the size, rather than against it.

I’m not done with markets, but I am absolutely done with trading in this manner. There is simply nothing for me to do from a retail purview, and I’ve beaten this game to the point where it’s not even fun for me to play the 9-5 casino anymore.

The hardest thing to do is walk away. If you know, you know — you are aware that you’re leaving the greatest thing that ever happened to you, but you’re going to do it anyway…

There’s a piece of writing called “Five Prophets” that has resonated with me deeply as of late and given me a clarity of thought I didn’t have prior.

I am convinced that all of history is a message, and this message is addressed specifically to me. The message tells me that this thing I take to be the material universe is actually something else. It is a machine, a contraption, built for an entirely different purpose I cannot possibly understand. Maybe it’s only a toy. Somehow, I’ve become trapped inside this machine, and I’ve confused it for the world, but it is not. I think the message is telling me how to escape.

All of finance is a message to me, and taking profit is the escape.

As to what’s next, I’m not sure, but I have an inkling. For the first time since the summer before college, I truly feel that I have time off, and I’m going to use at least a bit of it to get my health back and “touch grass”. I’m positive liquidity theory is generalizable — that being said, the nice part about markets is that it rewards pure generalists, but applying that drive to something tangible and physical rather than “risk-adjusted returns” is a novel concept to me, and I don’t like being wrong. So rather than immediately jumping in to the next project, I’ll probably take the summer to frame liquidity in the “real” world correctly so I can start building actual products.

I appreciate the patience, I know my absentia is never announced. Thanks for not unsubscribing, lol.

I'm 'bout to go golfin' man
Ay, I might even have me a cappuccino, fuck it
I'm goin' somewhere nice where no mosquitos at
Holla at me, it's your boy