Bigger is Bigger (when Betting is Better)

A thread about getting it in good.

(And a title about mocking @SBF_Alameda's little puns)
Getting it in good is a poker term referring to the idea that, when your odds are best (strictly speaking, EV of winnings, not odds per se), you wanna bet more. For many players, the ability to recognize spots where this matters is the difference between playing + and -EV poker.
Example: with top pair vs. a flush draw on the turn (and say you're confident about this, and you opponent knows that, etc. etc.): if they miss the river you're getting $0 more, if they hit you lose. So you want to get your opponent's chips in the middle on the turn!
This concept is *really* important to trading -- and I'll get there in a bit. But I wanted to illustrate the concept a bit more with some non-trading examples from something like "the real world" first.
@James_Holzhauer recently took "Jeopardy!" by storm, winning 32 games with an average score very close to the previous *all-time record*. Of course his incredible trivia and buzzer skills were at play here -- but that's not all that was happening ...

(R.I.P. Alex Trebek)
"Jeopardy!" selects for trivia skills (and camera readiness etc.) during casting. However, there are also various chances to make wagers during the game, and that can matter just as much as anything else. But casting doesn't filter for it *at all*, so most players are REALLY bad.
But not James! He knew his chances to get a random response right were high enough that his maximizing strategy was to bet HUGE early-ish til the game is locked up -- that's how he carried his streak so far. Same for Final Jeopardy, except by then the games usually *were* locked.
These wagers were some of the best spots in his life, probably -- even money for 5 figures on a trivia question he's 90%+ to get right? Betting max is the epitome of getting it in good, and he did that -- a LOT, and made a LOT.
Blackjack is a casino staple -- and counting cards while playing is a Hollywood staple. But it's actually a strategy that does work under some conditions! And it all comes down to getting it in good.
Some blackjack tables don't shuffle too often, and sometimes that means that deck composition can get "screwy." If there are more AKQJT cards left than usual (vs. the really low cards), it turns out that the odds can shift to the player's advantage.
Counters are just tracking this, and betting max when it gets good to do so -- betting min otherwise. This is a pure example of getting it in good! And really, it's analogous to trading -- using the count as a signal and putting on a bet when the signal tells you to.
BTW, this is why a good pit boss can detect a counter -- they'll count too and check who's increasing bet size at the right times.

(I may or may not be banned from 3 casinos for this. Allegedly!)
And there are many more examples -- anything with betting will tend to at least often involve this (if you're thinking about it right), but anything where actions have some uncertainty and quantifiable outcomes with EV CAN involve ideas surrounding getting it in good.
I try to think like this *all* the time in my life -- in college I hoarded Chipotle gift cards every December when you got a free burrito per $25. I've barely slept for the past ... uh, months now, planning to sleep when trading less intense. Etc., all the time. Relatable!
And never more than when I'm trading. I make thousands of trading decisions per day -- meaning I've made millions lifetime. Yet, I'm pretty sure the 10ish that mattered most had higher PNL impact than all the rest -- and that's because I'm generally cognizant of when to bet big.
Here are some short threads, each detailing a recent-ish trading situation and how Alameda handled it. Each is an example where we either made a great decision because we got it in good, or realized we screwed that up in retrospect:
When OKEx's withdrawals got blocked, many in the space panicked -- how did we decide what to do?

During the week or so when lots of news about XRP was coming out, we realized early on it was reacting kinda ... idiosyncratically. What did we do in response?

BTC's price has been in a sort of specific paradigm for the past few months -- and we felt like we REALLY understood it around a few price levels. How did we choose how much to bet?

I'm kinda just poking the bear with this one.

But the bear is like, right there. And this stick was expensive!

How do we decide how much USDT to create?

And, one of my favorite (and most baffling) trades ever -- how have we optimized around the crazy TRUMPFEB trading during the past few months?

We knew we had edge -- HUGE edge, maybe -- in all of these cases. Making ... 10? 100? More? Times as much on a trade where we KNOW that? That's worth a TON! And figuring out how to size our best trades up is as critical as finding them, often WAY more so.
Edge is precious, and when you've got it it's so important to leverage it. A good trader figures out their edge and makes money from it -- to be the best, you've gotta know when to size up. Getting it in good? That's good! But getting it ALL in GREAT? That's even better.

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More from @AlamedaTrabucco

14 Jan
Ah, election trading. I think trading the election in November was some of the most fun I've ever had in my life ... for the first day. Maaaybe the second.

Kinda wasn't expecting it to last 3 months.

But, always a silver lining: people were bidding TRUMPFEB high. WAY higher than we ever thought was reasonable -- we couldn't find a single informed source who honestly believed the probability of Trump remaining in office was higher than 1% or so. And LOOK at this chart!
We quickly decided we believed our fair way more than the market and that there were no real selection effects here -- it all became a question of maximizing the amount of $ we could make from selling into the bids.
Read 11 tweets
14 Jan
As I've been saying a lot lately on Twitter, Alameda is quite comfortable with the Tether team, and we do a lot of large creations! I talked about that in more length in this thread:
What does "large" mean, though? Well, it depends! And it doesn't just depends on any absolute metrics, or on market conditions, or whatever -- it also depends on our own ability to think through the question of "how much should we create" and "how much is like, too much, c'mon."
Soon after we got set up to do creations, we did some initial studies to determine how much we could sell above $1 + X + Y + Z, where X was creation cost, Y was "execution cost," and Z was "cost of tying up capital." We also charge for our time and add some edge somewhere.
Read 13 tweets
14 Jan
BTC took forever to break through $20k -- I talked about the day when it finally happened here:
Right after it broke through, I noted in the thread that our big intuition was that it would RIP up even more. And then rip, and rip, and rip -- which it did! We were confident because of what we knew about liquidation behavior near recent optima ...
... and this was a GLOBAL optimum, so we knew there'd likely be tons of liquidations once it broke through $20k. So, once that happened? We literally got as long as we could, given the liquidity, and without fucking up our execution too badly.
Read 9 tweets
14 Jan
During this period, when XRP was plagued by rumors about the SEC's investigation into Ripple, we realized pretty early on that XRP's price was *really* reactive to headlines -- in a fairly surprising way.
The big news obviously had big impact -- it fell a TON when that first happened. As a bit of a side note, how to size bets on that first crash? In this case, we of course were confident it was ~bad~ -- how bad?
We decided a few things:
- probably, *we* were not the people with the best handle of like, the legal landscape, to the point where we didn't think we had a "fundamental understanding" of how bad this was
- probably, it didn't matter a ton, because liquidations
Read 9 tweets
14 Jan
Amidst OKEx's withdrawal suspension -- there was a big level one concern -- Alameda does trade on OKEx, and we had some funds locked there. Was there anything to do?
Eh, not really. There were OTC markets like, 25% down from spot that various people were bidding for OKEx funds -- but once we accounted for actual risk (seemed small, the chances it was actually seized seemed *really( small given what we knew) and opportunity cost, seemed bad.
Seemed *really* bad, actually -- we thought anyone selling into those bids was WAY overpaying for insurance. (A big part was that OKEx trading remained great, BTW -- that made the opportunity cost quite small).
Read 7 tweets
11 Jan
BTW, to connect some dots here -- a lot of the people seeking access to a coin like USDT *aren't* doing so via creation. They're often doing so via just sorta buying it in the markets -- and they're buying a LOT, and REALLY aggressively.
The premium with which USDT trades to $1 is pretty volatile as a result -- as I type this, the average BTC/USDT market (as compared to BTC/USD) is trading about 15bp lower, implying USDT = $1.0015 or so. And that's all from people AGGRESSIVELY selling BTC vs. USDT to get USDT.
And note, *these* are the best markets to use to determine where USDT is trading -- the combo of BTC/USDT and BTC/USD markets, e.g., are WAY more liquid than any exchange's USDT/USD market, so the prices from these (even though it's a two-leg trade) matter way more.
Read 11 tweets

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