Tales of woe and tales of joy related to trading the stockmarket: Shocking and amusing

Some interesting trading stories

Story No.1

Jesse Livermore stuck in a short squeeze.

As you view this extract you are encouraged to work out how Mr Livermore managed to escape with a mere $25,000 loss when he was faced with a potential loss of several millions.

Jesse Livermore was short 10 million bushels of corn and has to buy them back ( at a loss ) because on the other side of town is a big grain trader he refers to as "Mr Stratton" who has

cornered the corn market and had been buying most of the contracts available thus running up the price against Jesse.

The problem was that if Jesse started to buy corn at market then Stratton would force him to pay higher and higher prices as he was the only person with enough corn to satisfy the buying

to cover the huge short position of Mr Livermore.

Stratton also had cornered the oats market holding thousands of futures contracts.

The point here is that there just is no solution unless one thinks with a corkscrew mind.

Try and work it out before you scroll down the page.


Jesse Livermore was a complete and utter genius






Answer:


Jesse firstly puts in his buy stop orders (above the current price) for 500,000 bushels of corn at price intervals of a quarter of a cent on the way up.

Then he gave four identical orders to four different brokers to sell 50,000 bushels of oats. Yes OATS!! not corn.

These sell orders were random enough and of enough volume to do two things.

1 The price of oats began collapsing very fast.

2.The resulting down break in the price then caused the floor traders in Chicago to figure that corn may also break down sharply and so they begain short selling corn. As of course they are

highly correlated products.

Jesse has his buy orders waiting there in anticipation the Chicago floor traders ended up being sucked into holding Jesse Livermore's 10 million bushels of corn short position. Jesse bought

back his corn short position at only a 1/4 of a cent higher price than it was before he started the plan. After this, Jesse covered his decoy short position in oats for a tiny loss of $3,000 and

went of to Florida for some fishing.

The unfortunate floor traders who sold short the corn ended up paying 25 cents a bushel more to Mr Stratton to get out of their short trades.

In conclusion, the man was a genius but also very much of a big risk taker to hold such a big trade in the first place.


Story No.2


A floor trader studied the commodity reports and charts over the weekend and decided that the price of Pork bellies would hit resistance at $75.50 and he had a good record of trading and

getting it right.

Monday morning came around and there was a reorganisation of the layout of the pits in the futures exchange he was at, as he was so confident his analysis was correct he was pleased to

see the price at 77.40, so he immediately begain short selling thousands of contracts for his clients, thinking he was getting some impossibly good high price to sell.

About 30 minutes past and the price continued to rise and seemed to be moving in a different manner to which he was accustomed, he noticed that he did not recognize any of the faces of

the traders in the pit.

He also noticed that the price was over 81.50 and some people were staring at him.

Asking one of the pit traders "Is this the pork belly pit?" the reply came back, no they moved it over there on the other side ..........OH..NO.

I heard this story about twenty years ago, I don't even know if it was true, but it is kind of amusing.

What a collolsal blunder. Sometimes we get so engrossed in the details that we miss the obvious.

I have a few times been immersed in trading to such a degree that I have forgotton what day it was and sat at my screen waiting for the markets to open. Nothing doing. Power cut?

Terrorist attack? After checking the news and internet connections I eventually worked out that it was a Saturday!



Latest news update from Wall street yesterday:


Diapers remained unchanged.

Helium was up, feathers were down. Paper was stationary.

Fluorescent tubing was dimmed in light trading. Knives were up sharply. Pencils lost a few points. Hiking equipment was trailing. Elevators rose, while escalators continued their slow decline.

Mining equipment hit rock bottom.  The market for raisins dried up. Balloon prices were inflated.

The main shock was that toilet paper touched a new bottom.


Story No.3


Learn how to train your dog to trade futures and use Elliot wave theory.

Fletcher the great Trading dog plays piano and guitar




 
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