Japanese day trader makes $34M in one day

[Samurai_Jerk]

While Many Panicked, Japanese Day Trader Made $34 Million

While a lot of investors were hitting the panic button Monday, a Japanese day trader who’d made a big bet against the market timed the bottom almost perfectly and narrated a play-by-play of the trade to his 40,000 Twitter followers. He claims to have walked away with $34 million.

As financial markets got crazy this week, many people turned cautious. Some were paralyzed. Not the 36-year-old day trader known by the Internet handle CIS.

“I do my best work when other people are panicking,” he said in an interview Tuesday, about an hour after winding up the biggest trade of a long career betting on stocks. He asked that his real name not be used because he’s worried about robbery or extortion. To support his claims, he shared online brokerage statements showing his trades second by second.

CIS had been shorting futures on the Nikkei 225 Stock Average since mid-August, wagering it would fall. By the market close on Monday, a paper profit of $13 million was staring him in the face. He kept building the position. When he cashed out late that night, a collapse in New York had caused his profit to double.

Instead of celebrating, he kept trading. He started betting the market had bottomed. When he finally took his winnings off the table on Tuesday, he tweeted, “That’s the end of my epic rebound trade.” His profit, he said, had almost tripled.

“It was a perfect trade,” said Naoki Murakami, who follows CIS on Twitter and whose markets blog has made him a minor celebrity in his own right.

[kurogane]

Good for him. I am curious to see how many of his day trader comrades did as well, and how many are now looking at 8-10 years of instant noodles in a Sanya flophouse, but yeah, feck it. This should convince lots of the lottery ticket buyers to give up their day jobs for the guaranteed riches and glamour of day trading. Still, good for him.

[Wage Slave]

Exactly. All gamblers make lots of noise when they win but very little when they lose. To generate that sort of profit in a day you have to be either betting ten to twenty times that amount or, much more likely, be buying and selling derivatives. Well to the right of the investing - gambling continuum.

Still, I do wonder about this mini crash. Was it partly a plot to force less liquid shareholders to sell at less than real value? Certainly there has been no shortage of buyers waiting in the wings in the hope of snapping up a bargain or two. And so far, it's been so good. Time will tell.

[kurogane]

In 3 sentences or less, if you please, what is the difference between the first option (the 10-20 times bet one ) and these 'derivatives' thingies? And why are the latter so inherently profitable? Just curious, btw. I am far too comfortably schleppy to think somebody like me could ever do day trading except as financial and/or mental suicide. That sounds like a caffeine/adrenalin junkie's wettest of dreams.

[Wage Slave]

In 3 sentences or less, if you please, what is the difference between the first option (the 10-20 times bet one ) and these 'derivatives' thingies? And why are the latter so inherently profitable? Just curious, btw. I am far too comfortably schleppy to think somebody like me could ever do day trading except as financial and/or mental suicide. That sounds like a caffeine/adrenalin junkie's wettest of dreams.

Well you got it right as far as I can see. The first option would involve actually buying and selling shares. In a day, even an exceptional day you aren't going to make much more than 5% to 10% unless you have all your eggs in one very lucky basket. Derivative trading means that you don't buy any shares but you buy the right to buy (or sell) a much larger number of shares at a certain price. If the share price goes the right way you make heaps (cos you have the rights to lots of shares) but if it moves the wrong way you lose heaps for the same reason. If it moves the wrong way, then once you get near losing your original stake (very quickly) the whole thing will be cancelled unless you put more money into it. That's a so called margin call.

[kurogane]

Got it. Very lucid. Thanks. I figured it was something like that, or like you said, closer to gambling than investing. Strangely, like you I have only heard FANTASTIC STORIES!!!!!!!!!! from the day traders I have met.

[inflames]

Firstly, you can't short futures. Basically the guy was either selling Nikkei 225 call (or whatever you call them for futures) futures at the money or buying out of the money put futures. The price fell and either way he made a ton of money. The thing is that in order to trade futures like this you need a ton of money plus a very liquid market (Nikkei 225 futures are).

If you want to see something crazy, Bank of America $16 call options expiring today were trading for around .10-.15 on Wednesday. Thursday they were around $.45 - in a day you could have tripled your money. Of course, you couldn't make millions off of it but if you were lucky enough you could make $10k or so.

[legion]

Well I guess all that Abenomics money has to go somewhere

[omae mona]

Firstly, you can't short futures.

Basically the guy was either selling Nikkei 225 call (or whatever you call them for futures) futures at the money

or buying out of the money put futures.