Ferox

Ferox Advisors. Ferocious Alpha.

Absolute Returns Asset Management Company managing client accounts and proprietary capital, with a focus on exchange listed derivatives and crypto currencies

True Neutral Investing (or Part 2 to James Dean Style Investing)

Acknowledging the presence of randomness under discrete circumstances. On a long enough timeline everything and everyone is destroyed and recreated. But before we get to this ontological level, there is an infinite number of possibilities of what can happen in between. And by infinite, we mean a concept beyond current human comprehension (exceptions prevail). So what does this imply in the world of financial markets, investment and for the true connoisseurs of intellect: wealth creation?

It implies embracing the unknown and its immense temptation to lead humans into panic, fear and irrational activity. In a market where the vast majority of players are forced to act irrationally on a discrete basis day in day out, what is your move? Can you profit from this Chaos, the untamed beast?

 

Yes you can. I have one single thought before entering into most trades, the adaptation of which can and will make you the lunatic among lunatics, a commander in the army of madness, or even better: The Prince of Chaos:

1) No matter what happens, I want to persist in my original point of view (*1).

Why do I want to do that? Because even a monkey has 50 % chance of making a winning decision under random conditions. However above 90 % of all trading accounts end up as financial losers. Why ? Fees, slippage ? No. Psychological destruction on the subliminal level that forces one to make losing decisions to get out of the discomfort of living in a state of chaos. They must be totally unaware then, that chaos is the most original and instinctive state for all life, and all survivors must learn how to harness it.

Back to our example. I want to make a trade where I won’t have to change my mind. Against a current of madmen acting in all kinds of ridiculous directions, I want to be the most deranged of them all. I want to, counterintuitively, remain unshakeable, amidst a current of constant change.

Is this possible, is there such a trade that can enable this without blowing up your account on a daily basis. Yes, in reality, this is one of the primary reasons the world of derivatives was created.

Ok then, what is the trade that will never change? The trade that will either make every ordinary counterparty win very little insignificant amounts, or earn me and my investors a fortune, either small or grand, but a fortune every single time:

I call it “The Perpetual Butterfly”.

To be continued…

(*1: Thus I’m effectively and truly neutral, to external circumstance (just to demystify the title a bit).).

 

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