Thread by @0xMerridew

Rules of Trading:
1) Don't lose money
2) Make money

Lots of small positions with a special focus on options with decent sized premium representing a lot of non-recourse leverage (mentally treating ATM options as their notional implied exposures)
Wide universe of trading

https://twitter.com/0xMerridew/status/1965105800239567004

Account has crypto, options, international stocks, US stocks, sometimes bond ETFs, occasionally currency options

Fastidious focus on risk management, with panic fully setting in on drawdowns greater than 5% and full position re-evaluation
Focus on relative market neutral trading, with high downside convexity

Accounts have around 500-ish positions I think, and rarely have a position that is more than 10% of the account notional, and even then, usually a lot lower VaR than that

Keep correlations low, both mentally and through relatively frequent risk checks (first order beta but more broadly single factor exposures - my drawdown in July was in theory uncorrelated stuff, in practice imagine the likelihood of 7 down days in a row at 2.9 sharpe)

For a directional options trader, the secret sauce is cheap leverage, which means buying things under your theo (not really anything concrete, I have some rules of thumb on this)

In general my rule of thumb is alpha is roughly proportional to the universe size, although I'm not sure if it's square root or squared tbh
The wider the universe you can trade, the more alpha you can possibly generate

This largely flies in the face of what most institutional traders will say and think (because most tend to be specialists in one or a few markets), but I've observed this in both my pnl and others who trade not dissimilarly to me (@goodalexander @Citrini7 @orrdavid afaik)

@goodalexander @Citrini7 @orrdavid My book turnover is several thousand percent I think, but I don't really pay attention nor measure this
Alpha is also clearly proportional to turnover

@goodalexander @Citrini7 @orrdavid Also ignore basically all the greeks except maybe vega, gamma, and delta
Even then, idk, it's not very useful for me, I don't use an options pricer, nor do I know anything past a dirty price of what the thing I'm buying should be
And I trade a lot of options, far more than you

@goodalexander @Citrini7 @orrdavid If you have actual alpha and most of us don't (I'm not even sure I do, except in the time period this is observing), then fundamentally making as many bets as possible for you makes sense rather than concentrated bets
Concentrated bets only make sense when you have limited alpha