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The market acts predictably 97% of the time. The 3% factor is the unexpected
event that creates a loss that can't be predicted or prevented. What did you
do the day ConEd shut down and the NYSE didn't open? That Friday many stocks
opened 10 to 20 points lower. The evening that the Shieks sold their gold and
the gold market opened $30 lower. The 3% factor are those events that cause
changes in the market greater then normal and you can't protect yourself
against. Then along came options. Ira
David Singerman wrote:
> Ira,
>
> I think I have missed something. What is the 3% factor?
>
> Thanks.
>
> David
>
> ----- Original Message -----
> From: Ira <ist@xxxxxx>
> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> Sent: Thursday, May 13, 1999 11:55 AM
> Subject: Re: Stops
>
> > That 3% factor at work again. Ira.
> >
> > Bob Fulks wrote:
> >
> > > At 10:38 AM -0400 5/12/99, Don Roos wrote:
> > >
> > > >I hope you all slept through that one (the Rubin resignation news).
> 30h
> > > >down in 4m. A good reason to always have a stop in place. If things
> > > >are going to go wrong, they will at the worst possible time: "due to
> > > >system problems at the cme" the cubs system went down just before the
> > > >Rubin selloff. Not nice to have to call in an order while the mkt is
> > > >going down like a rock. The low in the es was the same as the spoos,
> so
> > > >no stop busting. They will have a hay day picking the cherries (stops
> > > >in place) for awhile after today.
> > >
> > > Would stops have helped?
> > >
> > > If you were long and your stop got hit, it would have turned into a
> market
> > > order to sell. Since there would have been no buyers on the way down,
> you
> > > would have been filled at the bottom around 1330 for a $7500 loss per
> > > contract.
> > >
> > > It looks like a good example of where the only protection would have
> been a
> > > standing put option.
> > >
> > > Comments?
> > >
> > > Bob Fulks
> >
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