STREET DOGS: Nerves of steel
How the worst trade can turn out to be the best trade of your life
From Jim O’Shaughnessy, chairman at OSAM: When I was 27 I paid great attention to the news and what people were saying about the direction of the market. I watched as the markets roiled on Friday, October 16 1987, with the Dow losing more than 4.6% of its value. I then made what at the time looked like the biggest mistake of my trading career: about half an hour before the markets’ close on that Friday, reacting to assertions that the market’s drop was way overdone and that we would see a huge snapback on Monday, I sold my entire put position. Just so it really sinks in, I repeat, on the day before the biggest crash in history, I let my emotional reactions to what I was reading and hearing drive my behaviour, and I sold every single put option that I had carefully accumulated over the previous several weeks. Had I held, I would have made a not-so-small fortune. But I didn’t. Indeed, I barely broke even on the entire trade. But I think that turned out to be the greatest trade in my l...
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