Professional Traders and Intraday Trading Strategies
Professional traders form a highly diverse group with each trader adhering to a unique set of strategies. Some prefer short-term positions, while others hold positions for extended durations. My own experiences as a professional trader have spanned a vast range of strategies, from short-term intraday trades to long-term investments that last for years.
Short-Term vs Long-Term Trading
While some traders frequently execute and liquidate trades in a matter of seconds or minutes, my preferences tend towards investing in positions for longer periods unless the current price significantly exceeds the intrinsic value suggested by the financials.
Short-Term Trading
My most memorable quick trades involved executing intraday futures strategies. These often required buying equity futures with the intent of selling them almost immediately. However, the experience was far from pleasant. There were instances where I would quickly reverse my position, bang my head against my desk in frustration, and hope no one witnessed my mistake.
Long-Term Trading
On the other end of the spectrum, I have held positions for many years. One of the longest positions I ever took on began in 1997, when I inherited some bond warrants on Daimler Chrysler bonds, which were basic options to buy the bonds. The global market back then seemed quite insane, with Chrysler issuing bonds with a 100-year maturity, expiring in 2097. To say that such bonds were risky would be an understatement.
These bonds were issued when the concept of existing car companies persisting for a century seemed utterly preposterous. Indeed, with the market for these bonds quickly drying up and them never trading again, it was a challenge to find buyers. I held onto these warrants until 2005/6, when I was advised to try and sell them but found no takers. The unusual market conditions made these warrants effectively unsellable.
The 2007 Chrysler Sale and the Windfall Windfall
Everything changed in 2007, when Daimler decided to divest itself of Chrysler. In this process, Daimler had to recall the 2097 bonds, essentially forcing their holders to sell back the bonds to Daimler at a significant premium. The automatic exercise of options on the bond warrants resulted in a substantial profit for me and became the most profitable trade of my career.
The lesson here is that even the most unmarketable positions can turn into lucrative opportunities under the right circumstances. The market's dynamics can shift drastically, creating unexpected opportunities for professional traders.
Conclusion
Professional traders employ a wide array of strategies, ranging from intraday profits to long-term investments. While some may focus on quick gains, others, like myself, have found success through a mix of long-term and short-term strategies. Regardless of the approach, the key lies in adaptability and a deep understanding of the market.