Wednesday, October 8, 2014

The Mother of all "180 Rule" Trades

So The New Yorker magazine published a great article on the SAC insider trading case.  It is more than a ten-minute read, but it is well worth the time.  There a lot of good things to learn here as a trader.


Most of the article is old news; those of us wading through the sewage of the Street every day have long since seen all of these seedy details.  But what I find most interesting as a trader was how aggressively Stevie Cohen used the 180 Rule.

(If you haven't read my little blog about what I call the "180 Rule," you can jump to the link below and read it: http://dasan888.blogspot.com/2014/01/the-180-rule-and-shorting-stocks.html )

What Stevie Cohen did which was so brilliant and gutsy (although armed with inside information) is that when the thesis changed on his alzheimer drug trade he not only sold all $750 million of the stock, but he reversed the position!  In a week, he swung the trade in what I think is the biggest 180 rule trade in history. 

Cohen has been called the best stock trader of the last 20 years.  Perhaps a lot of his success was fueled by inside information- who knows?  But one thing is for sure, his trading techniques are unparalleled.  When the thesis changed, he did the mother of all 180s.

I'll grant you, this is easier to do with inside information, but for the rest of us peons, plying the market for a living, perhaps we can learn from him.

I strongly believe that being able to execute 180s when trading stocks makes a trader hor concours.

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