Brainteaser

Suppose you're in a hallway lined with 100 closed lockers. You begin by opening every locker. Then you close every second locker. Then you go to every third locker and open it (if it's closed) or close it (if it's open). Let's call this action toggling a locker. Continue toggling every nth locker on pass number n. After 100 passes, where you toggle only locker #100, which lockers are open?

• The only way a locker could be left open is if it is toggled an odd number of times. The only numbers with an odd number of factors are the perfect squares. Thus, the perfect squares are left open. 

Market Update

• New home sales down by 13.3% since this time last year, and down 14.5% since last month

• 10 yrs richened 5 basis points this week (to 2.675%) despite stronger economic data and improved US equity performance

• Mortgages posted strong performance versus Treasuries as yields gravitated lower

Creating a Personal AccountThe Do’s and Don’ts

Brokerages

We use:• ThinkorSwim• Tradestation

Sizing

• Size different instruments differently– Is $100 of AAPL the same as $100 of /CL?

• Do you want to run a stat-arb or a concentrated portfolio

• What is diversification? – Do you want diversification / when do you not

want it?

Order Types

• Limit

• Market

• Trailing stops

• OSO

• OCO

Typical Assets

• Equity

• ETFs

• F&O

• Clearance/Waivers may be required

Equity

• Partial ownership in a firm• Your advantages– You can buy small market caps– Purchasing illiquid securities

Options and Futures

• Be very cautious!

• Margins = inherent leverage

• High risk, high reward

Some products to look at

• ETF– SPY– VGK– XHB

• Exotic ETFs– VXX (Note

the decay)– MNA

Discipline

• Why do you need a firm thesis?

• Can you simply copy a hedge fund’s holdings?

• Do you have cash on hand?

Mistakes

• Doubling down too soon• Early sale – Symptom of under-research

and low conviction• Looking at the stock chart (for equities) /

not looking at it (for non-equities)