Last week three of my former brokers emailed me to see how I'm doing. Back in my working days, I traded primarily US interest rates, but my main focus was not direction (whether rates were going up or down), or slope (whether the 5 year would rally more than the 2 year). I traded primarily curvature (how the 3 year rate moves compared to the 2 year and 4 year, etc.). Trading curvature requires you to trade in four times as many securities as trading directionally, because it has to be expressed as a butterfly structure.
Any of you who watch the market news knows that looking at interest rate directional changes most days is like watching paint dry. Interest rate slope moves even less (because you need the different rates to not move parallel to each other). Interest rate curvature trading is basically the nadir of watching nothing happening (because you need two different slopes to not move in parallel). So when you trade something that barely moves, you need to put trades on in huge size to make any sort of money. On top of that, I had a preference to put on "double butterflies" (hence my poker name) - which is two adjacent butterflies pointing in opposite directions.
To summarize... I needed to trade a multiple of 4x or 8x what a directional interest rate trader would need, and I needed to do trades in unbelievably massive size to make up for the fact that curvature moves less. It will come as no surprise that one of my nicknames in the office was the "Broker's Wet Dream." My managers would "joke" that they would rather have my brokers' income stream than mine because even though the amounts were comparable, there was no volatility involved with the brokers' income stream. My coworkers would say if they died and gone to heaven, they would be one of my futures brokers.
Of course, in real life, I look more like "Beat Anorexia" Man. But I will have the courtesy not to post that photo again.
[This post is just a ruse to post a nude photo of Jessica Alba - to get a little sex appeal going. Don't tell Mrs. Fly]
Ouch - Just Call
4 hours ago