Understanding Larry Benedict's positions
In Jack Schwager's "Market Wizards" there is such episode and I get really confused in understanding what he talking about: what means "bonds are still at 20 bid", what "3/32 in the bonds"?
"- Can we go back to the S&P and bond example?
- Okay, right now, the bonds are still at 20 bid and the S&P is bid $.75 higher. That move is equal to about 3/32 in the bonds, given that my bond position is about one-third the size of my S&P position. I could take profits on the S&P, put a stop in three ticks lower on the bonds, and if I'm not stopped out, take profits three ticks higher. The worst I would do is approximately break even, and if the bonds move up three ticks, I'll make money on both sides. It is that simple. I do lots of these trades every day. Sometimes my positions are big; sometimes they are small. Whether they are big or small depends primarily on how I am doing for the month and what our P&L is for the year to date."
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