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The SEMI Trading Collective

Greetings everyone!

In the time since our last contact, I have teamed up with a full-time retail option trader to organize this group. After lengthy discussion, we have decided to change our focus.

Welcome to the Southeastern Michigan (SEMI) Trading Collective. Our main goal is to promote financial literacy with a focus on trading and personal portfolio management.

We hope this group will be significantly different from other trading-related groups we have attended. Among other things, we welcome and encourage participation of men and women. We encourage and support presentation on different topics by different group members. We encourage networking and the formation of trading teams.

Here is a partial list of topics for discussion:


The cost to be a member of this group will be $10 per year. We will also charge $10 per Meetup for those who attend.

If you make this group a priority, attend meetings consistently, and keep an open mind then we hope you will come away with an understanding of finance unlike anything you have seen before.


Disclaimer:

SEMI Trading Collective provides information for educational purposes only. We are not a Broker-Dealer nor are we a registered financial adviser. We do not know your situation and have no way of knowing what level of risk may be appropriate for you. We make no specific trade recommendations. The risk of loss in trading options can be substantial so please be aware of all risks before placing any live trades. Hypothetical computer-simulated trades are believed to be accurately presented but actual profit and loss may vary due to market factors such as liquidity, slippage, and commissions. All information provided here is for your personal, non-commercial use only.

Birds of a Feather

“Birds of a feather flock together.” So why don’t we as retail investors? I want to spend some time discussing this based on my time spent trying to network with others and meeting with trading groups.

I have had a difficult time trying to find other traders with whom to discuss option trading much less to collaborate on trading system development. I have already written about trading as a lonely pursuit.

If I were a conspiracy theorist then I would say this happens by design. “Divide and conquer” must be an institutional mantra because working unchecked, we [retail traders] fall prey to heuristic thinking. This probably contributes in large part to the fact that 80-90% of retail traders lose money to institutional coffers.

Except I am not really a conspiracy theorist.

Varied style preferences are perhaps the biggest reason traders have difficulty hooking up. Preferences are responsible for what tickers I like to trade, what software I like to use, what time frame I like to trade, and many other considerations. Incongruity amid any of these factors may be sufficient for incompatibility. If I am lucky enough to find a trading group where 10-20 people come together then what’s the probability I will find matches across the spectrum?

Aside from individual preferences, differences in personality traits can derail a potential partnership. I may not like anger, sarcasm, conceit, or laziness. It’s almost like we need eHarmony’s 29 dimensions of compatibility to discover who will get along. This isn’t like a corporate job, either, where people are forced to cooperate or be fired. When we can walk away without obligation, we will. I have found traders (myself included) to be a very fickle lot.

Bottom line: when I overlay the low probabilities of finding an overlap in style with finding a solid personality match, it’s no surprise why the trading space ends up seeming sparsely populated. Suddenly it makes more sense why people turn to commercial means (e.g. selling newsletters, trading services, or forming “trader education” companies) in an effort to create a following and to foster community.

Day Trader Meetup Review (Part 3)

Today I will conclude my review of the first day trader Meetup.

Once we finally got around the table and through the introductions, the organizer took 15 minutes to present one strategy and a few other slides. We then got to eating and talking among ourselves. It seems like a good group of people. Being filled with newbies, I think the group could benefit from some basic presentation about trading. This would include some teaching on trading system development, countering heuristic thinking tendencies, and general tenets of optionScam.com.

Later that evening, WM posted a comment on the website:

> I came to a day trading group with undesired long term ideas. I
> then tried to force them on the group. SORRY won’t happen again.

My intent was not to make this guy feel bad but rather to teach him something. I figured that unfortunately, he would just go on studying Hurst and continuing to get nowhere. WM is like the occasional entrepreneur we see on Shark Tank who has spent a huge amount of money [and time] trying to develop a product/business. Without revenue the Sharks often shake their heads and say things like “this is just a bad idea,” or “cut your losses already and move onto something else.”

The Holy Grail is advertised and marketed in many places. I firmly believe it is myth and only capable of impeding my progress by draining resources. One way I avoid this trap is to steer clear of anything too complex. In WM’s case, the advanced theoretical math is literally way over his head. Anything “proprietary” is also too complex for me because by definition, I will never know what it is.

A second Meetup was held a few weeks later on a Wednesday evening and only three of us (WM, the organizer, and myself) showed up. Yes, WM was still trying to preach Hurst theories and he eventually stood up and said “thanks guys but this group just isn’t for me.” I think he’s too brainwashed to contribute but I do hope others attend future Meetups.

Option Trading Meetup (Part 3)

As I was writing the last post I got the sense I was being too hard on this group. Today I will reality check myself.

I criticized DY for claiming to have been trading for 30 years and over seven figures per week. This is not verifiable and therefore not something I believe should be brought into the discussion. All it can do is serve as a faulty basis for trust. For this reason, I don’t share such information with others and this is probably why the organizer treated me as a newbie when answering my question.

But experience is often stated in other fields. Pharmacists will say they’ve been practicing for X number of years. Surgeons will say they have done Y number of surgeries. Lawyers will say they have litigated Z related cases [and won, which is also not verifiable]. As a society we accept these claims. Why should one not accept a similar claim from a trader?

I feel like fraud and deceit are more prevalent in Finance because it is all about the money. Pharmacy, medicine, and law may indirectly come down to money but there can also be other things involved (e.g. medical treatment, legal rights, and wanting to help others). Finance is the direct conduit to money and is therefore at risk for stronger exposure to greed: one of the seven deadly sins. While this sounds good, I have no data to support it. I should therefore recognize it as a personal bias but not act on it.

I sometimes disagree with other traders because I focus on data science while they employ “conventional wisdom.” I can continue to follow the data. If disagreement leads someone to say “I have been trading for 30 years and I trade seven figures per week” then I can respond “I have extensive live trading experience too” and move on. I don’t need to disqualify them just because they stated unverifiable experience. I also don’t need to accuse them of fraud.

Hopefully my second visit to this Meetup will be more fulfilling.

Option Trading Meetup (Part 2)

I left the Meetup fuming and doubtful about my prospects of returning in January. I texted the following to a friend:

      > I always find know-it-all type people at these
      > Meetups who are totally full of themselves.

      > Maybe I should look in the mirror and ask
      > whether I am one of these too.

      > I am somewhat dogmatic in my belief that so
      > much of this stuff cannot be known for sure.
      > Much certainty I often see displayed is
      > totally unfounded.

      > Perhaps that means I often butt heads with
      > supposed “experts” only to raise some of the
      > thought-provoking issues I believe we should
      > all explore in an effort to understand this
      > complicated stuff. There are many key
      > concepts I still struggle with after years
      > of work.

      > I guess I get irritated at seeing them make
      > definitive claims about things that I do not
      > see as definitive. Nobody else in the group
      > is going to challenge that because they are
      > beginners.

DY claimed to have been trading for 30 years and over seven figures per week. I don’t care how long someone says they have been trading options or how much they claim to have made or trade because none of this is verifiable. The world of Finance strikes me as screwy because those lauded as de facto experts are usually people with significant conflicts of interest. Given the all the financial fraud perpetrated to date, I would have great difficulty trying to argue that “financial professionals” actually care more about my performance than they do getting my business, bolstering the total AUM, and making more money for themselves.

I did not enter the room with hopes of being respected as the trading expert. I hardly think of myself that way. I did not talk about my experience or about my profits (or losses). I did find it amusing/insulting that when I posed a couple discussion questions about the first instructional video we watched, the organizer herself answered with simple, incomplete answers almost as if to placate me.

Seriously?

I’ll break this down further next time.

Option Trading Meetup (Part 1)

I wanted to report on a new option trading Meetup I attended in December.

I was excited to finally attend a Meetup dedicated to option trading not sponsored by any financial company. I have attended Meetups sponsored by a trading newsletter, a trader education company, and a financial planner in the past and every time I have encountered a potential/likely conflict of interest. While I got little/nothing out of those Meetups, the organizer always found some potential customers. That did not seem to be an issue here although reading that their November presenter was CFA at a “wealth management” firm did arouse suspicion.

With the CFA not present in December, I thought I might have a good opportunity to network with “like-minded” individuals.

This was clearly a beginner’s Meetup with the intent to teach people how to trade options. The organizer herself and husband both said they were just learning. While I don’t feel this is necessarily a problem, who was going to teach on this night?

The one like-minded individual for me to meet was a guy [I’ll call him DY] who had supposedly traded options for 30 years. He also said he trades options amounting to seven figures per week.

DY was a “know-it-all” (sound familiar?) who stepped into the expert role almost without being asked. I say almost because the organizer did seem to defer to DY for answers a few times and I surmise that was based on how things went at the first meeting in November. Outside three instructional videos shown by the organizer, a few questions were asked and some discussion was had. Involved with every exchange was DY who at times seemed to stumble over his own feet rushing in so fast to provide what he believed to be the correct answer.

I’ll continue next time.

Meetup Update (Part 2)

In the last post I mentioned that neither Meetup I attended this week provided any actionable ideas.

A discussion awaits about what “actionable” really means. For now, consider it “capable of generating trading profits.”

Tuesday evening involved a number of attendees sitting around at a bar eating and drinking. My beer was outstanding but neither that nor the buzz that followed were actionable.

Perhaps the closest thing to actionable was one guy’s experience about losing money trading Forex. He is now on a crusade to make sure everyone knows what a scam Forex is for the retail trader. His experience mirrored what I have studied about Forex so I think his advice to avoid Forex is indirectly actionable. By avoiding Forex we may avoid losses, which is akin to making money.

Much unactionable debate was had about the state of the economy, future direction of markets, and other fundamental information. I would argue that none of this provides market edge. Predictions are uncertain bets or wagers that belong in the gambling domain. People can be right if lady luck chooses to shine on them. If you believe otherwise then I would refer you to any number of intelligent minds who make incorrect predictions daily on CNBC.

Like fundamental analysis, most black box trading systems are not actionable. One attendee on Tuesday talked about a trading model he develops and sells. Since I have yet to write on this topic, I’ll reference this article as a reason to steer clear. On Tuesday I asked my new friend how his model has been validated (that’s a financial engineering term).

“By the testimonials of our customers,” he said.

Ha!

In the con-artistry game, most testimonials are confederates of the bad guy. Welcome to the world of finance. Personally, I would not consider his product actionable unless I tested it myself. That would require more resources than I have available at this time.

I will continue in the next post.

Investing Meetup Report (Part 5)

I’ll complete this review of the Meetup from three weeks ago by discussing a couple other attendees.

One attendee was a real estate investor who stated his reason for attending was to learn more for diversification purposes. The implication was clearly that he does well with real estate and has money to invest elsewhere. Also supporting my inference is the fact that he passed his business card out to everyone present. As we were leaving, he engaged me in conversation by asking if I or anyone I know might be interested in real estate. I said “not at this time.” He quickly dismissed me soon after saying his wife had texted telling him to come home for dinner.

Speaking of ulterior motives, this is something I have also commonly seen at Meetups: people in unrelated fields looking to market their wares. Was this guy really looking to learn about stock investing to put his real estate profits to work? Maybe. I think it’s also likely he was looking to advertise his real estate experience of buying and flipping houses to a group of people eager to make money. We’re attending a stock investing meetup because we want to make money, he figures. Why not try and make money through real estate and give him our cut instead?

The last person I want to discuss is another financial advisor in attendance. He was not with the company organizing the Meetup. With conflict of interest in mind (how could it not be?), I wonder why he chose to attend. He said he loves learning about investing and finance as a whole. I then asked the pointed question: what was he hoping to learn that he, being in the business himself, did not already know? I wonder if he was just checking out his competition (other advisors) or if he was looking to network and possibly find new clients himself? I’ll found out more as time goes by.

This Meetup was typical of others I have attended: arrogance, sales, marketing, ignorance, and a lack of useful connections. At least it was an excuse to get out for the night.

Free food, too… who can forget about that?!

Investing Meetup Report (Part 4)

I left off explaining what the Meetup presenters did that left me wanting.

I just asked whether Dimensional Fund Advisors was a company like Blackrock.

For the record, I am very skeptical about the supposed “DFA advantage” that Dimensional Fund Advisors advertises. It was never my intent to argue about whose funds were better.

Rather than just saying “yes, DFA is another fund company,” they gave me an unnecessary/lackluster attempt at sales. By pooh-poohing DFA out of ignorance, they implied superiority of their product. This certainly doesn’t sound like an objective Fee-Only advisor to me. A Fee-Only advisor should do what is in my best interest and that would require knowing what else is out there! If they were going to deliver a sales pitch then they should have had a politically correct response why Blackrock is as good for me or better than DFA. Their ignorance does not mean theirs is better if they are simply fools.

And their ignorance did suggest to me that they may simply be fools. DFA has been a subject for discussion in Forbes, by CBS, on CNBC and MSNBC: they are world renowned. Their list of “Academic Leaders” (board members) is a veritable Who’s Who of options, investing, and risk analysis: Eugene Fama, Kenneth French, Robert Merton, Myron Scholes, Roger Ibbotson… are you kidding me?! How could our presenters not know about DFA? Despite my skepticism, even I am awestruck by the celebrity of DFA’s board members and the level of “expertise” they represent. To plead ignorance strikes me as utter incompetence on the part of the presenters.

I’ll wrap this up in the next post.

Investing Meetup Report (Part 3)

Last time I reviewed Mr. Know It All’s contribution to my recent Meetup experience. Today I discuss the presenters: a financial advisory team headquartered just across the street.

Yes, they were actually financial advisors! I can see your jaw on the floor so I’ll wait just a moment for you to pick that up.

One advertised purpose of this Meetup was to teach. How can they aim to teach gratis and work to financially advise us, which entails teaching for a fee? Without the fee, would they teach enough to enable us to invest on our own? No…

Another advertised purpose was for networking. Do they really want prospective investors to meet and potentially collaborate when that may preclude us from hiring financial advisors? No! Only if good feelings from meeting others translates to gratitude and perhaps the eventual hire of their company has the Meetup achieved its true marketing purpose.

For these reasons, I consider this Meetup to be a significant conflict of interest. If the organizers knew beforehand that no Meetup attendees would ever become clients then I doubt they would ever spend the money to create and fund this group.

In the presentation, one topic they discussed was “questions to ask potential financial advisors.” They discussed Commission-Only, Fee-Based, and Fee-Only advisors. They were eager to identify themselves as Fee-Only advisors. They said Fee-Only advisors have a fiduciary responsibility to the client and don’t make money off the particular funds sold. Fee-Only advisors pursue the client’s best interests at all times.

For me, the presentation fell apart when I asked about Dimensional Fund Advisors (DFA). I noticed their slides had “Blackrock” (a financial services company) in the lower left-hand corner. I asked if DFA is a competitor of Blackrock. The speaker looked around at his two colleagues and shrugged his shoulders. He explained something about how he sticks with the funds that trade in largest volume, that have the best and most experienced management, etc. He did not answer my question nor did he even acknowledge DFA.

What is wrong with this picture?