Million Dollar Traders

Whilst intensively researching (aka skimming through) Green All Over I was reminded of a three-part reality mini-series from 2009 called Million Dollar Traders. In the spirit of Turtle Traders, eight aspiring but decidedly amateur people were given the chance to join the hedge fund of Lex Van Dam. The videos from the series are available on YouTube (links below) and so, last night, I decided to have another look rather than watch my nightly movie. 

The team was a disparate group. One of the eight was a shop keeper and had day-traded from home, losing heavily. In addition, there was an economics student, an ex-army Major, a female entrepreneur, an ex-veterinary, a fight promoter, a retired IT worker and an eco-warrior. We can be sure they were chosen to make a good story rather than for any great ability. It's the BBC way, make good telly, the truth can wait.

We were not shown the eight being trained up, which also adds to the belief that good telly over ability was the deciding factor in choosing the team. What can you teach people in so short a time? If anything then I am sure it was all very basic. The trades placed by the eight were all haphazard punts with the exception of one trade that I will detail later.

Watching the programme again, last night, I don't believe for one moment that these amateur traders were trading with real money. The small quantities of shares they were trading just wouldn't be handled by a City brokerage. I suspect they were calling employees of Lex, who "visited" every so often in a shirt (it was not summer) from, I suspect, another room rather than another office. There were also a few telling words of familiarity between traders and brokers suggesting that the whole team met up at the end of a day of filming.

There was a lot of writing down of trades and keeping track of figures. I also suspect this was to keep a tally of the trades and in so doing proves that the trades were not real otherwise they would be electronically accessible from the brokerage.


The Wild Bunch - Million Dollar Traders

Leaving aside the fact that the trading was not for real money the process was fairly realistic. The point of a hedge fund is to buy long and sell short financial instruments whilst hedging against failure. As far as I could see in the programme there was only one hedged trade placed by the team. 

The soldier had read about a rights issue by HBOS to raise funds through issuing new stock and so he was going to buy HBOS shares in the hope that they would go up in price. To protect himself the soldier was going to short the company performing the issuance as they were liable should the issue not be fully taken up by existing HBOS share holders. In the end only 8% of the new stock was taken and HBOS fell in price. However, the shares of the company doing the issuance did not fall and so the hedge failed.

The trades by the rest of the team were pretty speculative. The retired IT worker had no clue and left the team. The ex-veterinary was too frightened of failure to either place trades or stick with a trade that momentarily went against her. The fight promoter just bet on the companies that made the products he owned. The soldier used his knowledge of the military and conflict to buy the stocks of weapon manufacturers. This was much to the annoyance of the eco-warrior who spent most of the time moaning about the evils of capitalism. At least he made the lefties in the BBC happy.

The most successful trader was the entrepreneur but we never got to see any of her trades. The shop keeper was similar to the ex-veterinary and was too risk averse to perform. The economics student understood the game and eventually became the second best trader after the entrepreneur.

To add to the drama, and that is what these shows are all about, the fight promoter, shop keeper and eco-warrior walked out when the ex-veterinary was relieved of her duties and asked to leave. In the end the only trader to make a profit was the entrepreneur with 0.5%. The soldier and the economics student lost 1% and 0.5%. Lex had lost 1% in the same time period.

What can we conclude from the series? It was filmed in 2009 whilst there was much market volatility. Lex's hedge fund had made a loss in that time and for three people to equal or better him was an achievement. The others failed simply because they just didn't get it or did not have the right psychological profile. They let past trades affect future trades and were too frightened to fail, even with play money.

Links

Million Dollar Traders - Part 1, Part 2 and Part 3

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