Coffee with Professional Commodity Trader (Part 4)

The sunburn has finally healed after nearly two hours outdoors enjoying a Caramel Frappuccino and conversation with our professional commodity trader NK. Today I will wrap up the miscellaneous notes and talk briefly about future directions.

• One of NK’s big concerns is the market activity of March 2020. I refreshed his memory on the COVID-19 market crash (~35%) a couple years ago and asked why he might expect another crash anytime soon. The quick rebound is what scares him. The Fed came to the rescue, which only furthers belief that the stock market cannot go down in a big way. This belief is like playing with fire because nothing is guaranteed and should the Fed not act dovish we could end up with a lasting, catastrophic decline at some future date.
• NK can work remotely but likes the opportunity to go into the office to share ideas and to see other people.
• NK is a proponent of buying OTM VIX futures—maybe even closer to expiration as opposed to farther out—as a hedge for the overall portfolio.
• NK acts in a broker (agent, perhaps?) capacity for clients—some of whom don’t have the faintest idea about how to place a trade. They pay full service $60-$80 commissions, but it may be well worth it for clients who might otherwise make a mistake and lose many times more as a result.
• NK doesn’t trade client accounts in a discretionary manner where they may not know what his strategy is. Rather, clients usually call with something particular they wish to accomplish (e.g. hedging product) or to get advice on devising a strategy that will match their personal market outlook.

Because incorporating and sticking with new trading strategies has proven to be a herculean task for me, in order to make this discussion useful I should aim to start with something small. To this end, tasks I will ultimately need to complete include:

• Learning the symbols for new futures markets.
• Learning the multipliers and “futures math” for new futures [options] markets.
• Gaining a sense of familiarity for the charts.
• Looking at COT reports weekly.
• Learning the margin requirements and commission structure for futures [options] trading.
• Looking around for futures brokerages in case others may offer a better package than what I currently receive.
• Looking around for futures market data providers.
• Backtesting the new futures markets.

While I have brainstormed everything I can think of at the present moment, I repeat that my goal is really to do one [or two] per week [or month]. “Start small” and “look for continuous improvement” are mantras by which I try to live.

And because I will probably need the accountability of this blog to stay on track, I will probably be keeping you posted!