Agustin Lebron Profile picture
Make better decisions. Think like a trader! https://t.co/xW2DJQaMd3
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2 May
1/ Reading @nope_its_lily and this hit hard:

"In all honesty, most finfluencers have pretty shit takes on the market. It kind of arises based on the mismatch between the skills required to actually trade and the skills required to market oneself."

nopeitslily.substack.com/p/a-polemic-an…
2/ That statement is insanely and ridiculously correct.

I think everyone who has other high-value uses of their time goes through the same thought process.

"Why am I doing this?"
3/ I mean, if you wanted to read and learn from #fintwit, you could do so without posting.

If you're not selling anything (or trying to raise AUM which is the same thing), it makes very very little sense.
Read 9 tweets
20 Apr
I just answered an emailed question. I suspect @KrisAbdelmessih @SinclairEuan @therobotjames and others get these too.

"I'm a smart engineering/CS/math student/graduate. How do I get into quant trading?"

A thread. 👉

1/n
2/ I'm going to preface this by asking an important question:

Why trading?

Almost every outsider has an idea of what trading is that's pretty far from the reality. It's not "deploy cool ML models on gigabytes of data". It's:
3/
- Do I have enough cash margin in account JP44315A?
- Why does the data format disseminated by broker X suck so much with this new update?
- How do I optimize my tax footprint?

And a thousand other little annoyances. Plus:

- Am I about to incinerate $ somehow?
Read 10 tweets
2 Apr
1/ A short thread about priors.

- What are they?
- Why do we need them?
- A few specific priors I hold.
2/ Priors are supposed to be "beliefs you hold before seeing the data".

Taken at face value this is crazy. You've been collecting data since the day you were born.
3/ But what we usually mean by priors (in a non-technical sense) is "what is your default assumption".

You may object "Ah, I don't hold any assumptions until I see the data."

That's dumb. (A) You do actually, and (B) you couldn't function in the world if you didn't.
Read 12 tweets
31 Mar
A book review: London And The 17th Century

amazon.com/London-Sevente…

by @margarettelinc1

1/n
When Elizabeth I died, noblemen had to make a huge show of her funeral in order to prep people for the accession of James I (James VI of Scotland).

With modern eyes, it’s cool to see how critical the “show” was to a government’s legitimacy. Government meaning the king, obv.

2/
This wasn’t some unnecessary extravagance. Shutting the city down for a day or two for the funeral procession was a critical part of establishing the legitimacy of the next king.

Oh and by the way, yes James II really was a horrendously bad king.

3/
Read 18 tweets
25 Mar
1/ Musings about variance in trading, in sports, and in life.

A thread.
2/ Why does poker get played for big $ but chess (mostly) doesn’t?

Because of variance.

In chess, if you’re rated 1800 ELO and you’re playing someone rated 2000, you pretty much know exactly your P(win) and P(tie). (It’s 15% and 19%, go check).
3/ There’s no sense in betting for two reasons:

- A wide spread of ability directly creates wide spread in outcome. A 2400 will NEVER lose to an 1800.
- All these probs are pretty much known. $ gets traded when people disagree about probs. No such thing exists in chess.
Read 21 tweets
10 Mar
1/ Quick mini-thread on a useful way to think about risk based on a recent discussion I had.

"If I have an opinion about lithium price, should I trade $LIT?"
2/ Almost definitely not. $LIT is a very weird monster. Many ETFs that target second-tier commodities are equally weird. Why?

Because $LIT includes both producers and consumers.
3/ High Li prices are good for producers, bad for consumers. So what's the effect on $LIT?

It depends on the balance of producers and consumers.
Read 10 tweets
22 Feb
1/ Taking a break from options to talk about a general trading concept.

Intended audience: people who are getting into trading, people have read a bunch of “experts” and came away even more confused, etc.

A thread…
2/ I thought about putting this in the book, but in the end I decided it’s too technical for a general audience. The one sentence claim I make here is:

“Trading is the wrong term for what trading is. Trading is more accurately called positioning.”
3/ What do I mean by this?

Retail traders seem to obsess about “entries” and “exits”. But in my career as a trader, I *never thought about entries and exits. At least, not explicitly.
Read 34 tweets
8 Feb
1/ Welcome to Options 201! You might remember me from such threads as Options 101:



Or What’s The Deal With Having Edge?

2/ I wasn’t sure if I should keep going. We’re getting closer to “how to make money in options,” and I think public sources of such claims are always and invariably scams.

But I’ve decided this is still more “useful information to know” than trading edge, so it should be ok.
3/ Let’s start by talking about time. Time is surprisingly hard to think about. But why do we care?

Well, as we said in Options 101, we want to convert our options prices into vols because of #reasons. And to do so, you need to know t_exp.
Read 62 tweets
30 Jan
More ruminations on what trading can teach us about non-trading things. A thread...
/1
Recently reading @SinclairEuan's excellent "Positional Option Trading", and he reminded me of something I hadn't thought about for a while:

Great trades start with a known risk premium and then add idiosyncratic inefficiencies on top to get more alpha.
/2
The risk premium is a long-term thing. The vol premium or the carry trade aren't going anywhere.

But you can't really build a business on them alone. Too many people know about it, so returns are at best "ok" (i.e. low Sharpe) but with terrible tail behavior under stress.
/3
Read 14 tweets
4 Jan
1/ Options 101 (a thread):

When you teach options, they put you in jail if you don't start with this:

A call/put is the right (but not the obligation) to buy/sell a security for a given price at (or by) a certain time. Boring! Let's do an example:
2/ If I own the Mar 700 call in $TSLA then that means anytime before ~5pm on Mar 19 2021, I can exercise my right to buy TSLA shares.

I hand over $700/share and I get some TSLA stock. First let's note a few things:
3/ US equity multipliers are typically 100 (barring corporate actions). So when you buy 1 options contract (call or put), you're actually buying the right to 100 shares.

Remind me to tell you the story of when I messed up the DAX multiplier. I was *sure* was going to get fired.
Read 56 tweets
23 Dec 20
Many different-seeming activities have a very similar characteristic when you compare skilled people to world-class people:

Almost all of the difference can be explained by the quality of left tail performance.

1/many
1. In golf, @LouStagner and @scottfawcett have shown that scratch player vs professional "good shots" are fairly similar (within a few %), but the bad shots are sometimes 2x worse for scratch players vs pros.

And scratch players are really good at golf.
2. In chess, a big part of your ELO is how often and big your blunders are. The difference between an IM and world-class GM isn't that @GMHikaru finds brilliancies much more often, it's that his worst plays are still really good.

Arguably this is how @MagnusCarlsen wins so much.
Read 6 tweets
25 Jul 20
Had a long think about things @KrisAbdelmessih and @VitruviusCurve wrote this week. About ML in trading.

The levels of quant trading:

1/n
0. Fumbling around in the dark.

Most people stay here forever, and even those who progress past this level still revert to it with annoying frequency. :)
1. Does +EV trades.

Has figured some things out, can do good trades and know they're good in expectation. This is a hard level to get to!
Read 7 tweets