Execution Matters

Vol #12 - October 23rd, 2020

One of the first things options trader trainee classes taught us was that you bought “for” a price, and you sold “at” a price.

The importance of these semantics would mean literal dollars on the trading floor. “50 for .50” has only one correct interpretation - you’re buying 50 contracts for 50 cents - and that expression alone was enough to cement a trade. Maybe this is why I've always been a stickler for precise language.

Those rigid definitions were challenged this week, when we brought on a Senior Software Engineer - Sanjeev Suresh. He joins us most recently from 23andMe, but has also spent time at Visa and Socos - a startup that combines behavioral psychology and machine learning to make recommendations for parenting and child development.

During the interview process, one of the things Sanjeev kept telling me was how passionate he was about “execution”. I had my trader/Harvested Financial hat on, and kept thinking he was talking about the process of sending orders for financial instruments and matching buyers with sellers.

This conversation went along for several minutes before I realized he was talking about the general idea of “executing” - fulfilling the goals we’ve planned for, in an efficient and seamless manner. It wasn’t all that different from the values we think about when executing a trade. You have to be organized, disciplined, and precise.

Whether it’s a specific order to help construct a strategy and model portfolio, or the completion of a technical procedure - execution matters to us at Harvested Financial. The same way that we squeeze pennies from the market to deliver savings and returns to our clients, we hone our internal procedures to be as systematic as possible.

Sanjeev brings many different talents to Harvested Financial. As he’s spent his first week soaking up all the tools we’ve built to help bring derivatives to everyone, I’ve seen that while sometimes we use different words, the expertise and passion he brings is perfectly aligned with Harvested’s mission.

Whether it’s experience working for a regulatory agency (FDA vs. SEC), or the passion for planning, documentation, and process; once we get our terms down, we’re off to the races.

We’re all excited here to have another team member, and continue to spread the word about derivatives for everyone.

Thanks for joining us,

Mark Phillips
CEO

What clients are asking us:

• What about crypto?

  • We’ve gotten more and more questions about whether we work with cryptocurrencies. While it’s not part of our product suite right now, we see a lot of activity here, and the news this week with more legacy financial institutions incorporating this has been exciting.

  • If you’re interested in working more with crypto, either as an underlying or in the derivative space, please feel free to shoot us an e-mail with your ideas, or reach out at our contact page.

• Do you work with other advisors?

  • We most certainly do! In addition to managing accounts for individual investors, we also work directly with advisors to help them build their own practices and service clients with custom options strategies.

• Have you heard of this??

  • There are a lot of fantastic people working in the options industry. Whether they’re veterans or new entrants, we very much welcome the richness of backgrounds that are bringing solutions to investors.

  • We’re always looking at the industry landscape, and interested in hearing different ways people are solving investment problems. Feel free to send us an e-mail with interesting things you see.

Happy Friday!

Mark talked above about how important language can be to the trading business, so we thought we’d share a few of our favorite trading terms.

Buy “for” - When you buy a security, the correct syntax is “price” “for” “quantity”; $1.30 bid for 50

Sell “at” - When you sell a security, the correct syntax is “quantity” “at” “price”; 50 at $1.40.

Bid - When you’re buying a security, you’re “bid”. In a quoted market, the “bid” is the price someone would be willing to pay, and where a seller can immediately meet a buyer.

Offered / At - When you’re selling a security, you’re "offered" or "at" a price. The offer price is the side of the market where a buyer can find immediately liquidity.

Take ‘em - The buyer is accepting the sellers last offer, and purchasing all of the quantity quoted by the seller

Sold - The seller is accepting the buyers last bid, and selling the entire quantity that was bid for.
This can also be used to express incredulity about a statement. “Amazon is over $5,000 by the end of the year” - “SOLD!”

Double - When prices were only quoted in nickel decrements, there was only one price that had two of the same number - .55.
“I paid two-double for 100 of the 35/40 call spread” ($2.55)

Even - This is a zero price on a trade that has more than one leg. While no dollars change hands, two or more contracts of exactly offsetting value are exchanged.

Cabinet - This means .01, and is an exception for trading in penny increments to close a position. Trades can take place at .01 to allow customers to close out old positions when they’re theoretically worthless.

Under Water - When an option trades for less than its intrinsic value. For example a call struck at $100 (the right to buy stock for $100), should be worth at least $10, if the stock is trading at $110 right now. If that call trades for less than that, it’s considered “under water”