Will Bachman talks to Tai Wong, a Harvard and Radcliffe class of 1992 alumni. Tai has been a trader for thirty years but believes that his best trade was asking his high school girlfriend to marry him. They married after she finished business school and they now have four children.
Tai shares that his family has been together for 27 years, and have had the opportunity to travel to many places together, but one of his favorite locations is Norway.
Tai initially became interested in finance after a summer internship at JP Morgan where he worked on the foreign exchange trading desk. Tai is a sell side trader, meaning he works for a bank and prices and facilitates client business, as well as making bets with the institution’s money. He has eight years of experience in currency trading, and five years experience in helping to build a successful large scale client trading platform for currencies at UBS. He has also been trading precious metals like gold, silver, platinum, and palladium, as well as base metals like copper, aluminum, and nickel, for the last 15 years. Being a trader has had a significant impact on his personality, teaching him to be direct, loud, and decisive.
He considers his ‘real’ job to be being a father, husband and son, but he loves his day job too.
Spoofing and Manipulating the Market
Tai discusses how the past 10 years have seen a shift away from human trades in markets such as gold, silver, crude, and natural gas. He explains that 80% of trades are now done by machines, which take the human element out of trading and make it more anonymous. He also mentions spoofing, a crime where traders will show false offers or bids to try to manipulate the market. He explains that traders have tried to fool the machines by using techniques such as spoofing, though this has been made illegal since 2000. The shift to machines has resulted in fewer one and two lot trades, as well as fewer requests for quotes as machines can be programmed to execute trades over time.
Tai describes his daily routine which involves waking up to check Bloomberg on his phone to see what has moved since he last checked, and then scanning the headlines.
Using the Bloomberg Tool for Trading Insight
Bloomberg is a remarkable tool which tracks an immense amount of data and is used by 250,000 people per month, making them around $8 billion. When in the office, the Bloomberg tool is used to log in overnight and use pricing tools for options, sheets that show risk, futures and liquidity. It can be confusing for those who have not used it before, and is similar to what air traffic controllers have to do. The conversation then shifted to an example of a moderate potential trade. Bloomberg allows traders to monitor the market and look for opportunities to buy and sell, and can use a variety of tools to determine the best time to enter and exit the market. For example, a trader might monitor the market and look for a particular stock to rise or fall after an announcement, and use technical analysis to determine the best time to enter the trade. The trader can then use limit orders and stop loss orders to protect their capital and maximize their profits.
Life as a Trader and The Big Short
Tai reflects on his experience as a trader, discussing the rapid decisions that are often made and the importance of developing a thick skin. He talks about traders’ skepticism of authority and dislike of arbitrary rules and notes how their experience impacts their personality. Tai remembers the many crises he has witnessed and the feeling of watching the markets move in response, and he reflects on his experience at Lehman Brothers when it went bankrupt in 2008.
He noted that the movie The Big Short did a good job of recounting the episode and was almost 100% accurate except for the empty trading floor scene. He further explained that many people continued to go to work each day after the bank went bankrupt and that the paychecks kept coming.
The Complexities of Trading in the Metals Market
Tai discussed the complexities of trading in the metals market, and the need to understand the nuances of each metal type. He broke metals trading into two parts: precious metals and palladium. He explained that palladium is expensive, and prices rose when Russia invaded Ukraine due to concerns about supply. He noted that the U.S. government did not put it on a restricted list, meaning supply was not interrupted. He concluded that it is important to understand the jargon and nuances of each metal market in order to be a successful trader.
Influential Professors and Classes
Tai remembers certain classes and professors that he found inspiring include Martin Feldstein and American Economic Policy, John Shearman, Professor of Fine Arts with whom he took a course on Michelangelo, Ezra Vogel who taught Industrial East Asia Foreign Cultures 26, and Richard Pipes who taught about the Russian Revolution.
04:30 Exploring Norway in the Summertime
05:53 30-Year Wall Street Trading Career
11:17 Exploring the World of Metals Trading
18:57 Exploring the Impact of Automated Trading on Financial Markets
24:20 Bloomberg Trading Tools and Risk Management
25:05 Hedging Gold Futures: A Discussion of Trade Mechanics
31:29 Counterparty Reputations in Financial Trading
34:23 Exploring the World of Commodity Trading:
36:31 Colorful Traders and Jargon on the Trading Floor
39:36 Experiences on Wall Street and Regrets of Not Taking Certain College Courses
Tai Wong, Will Bachman
Will Bachman 00:01
Hello, and welcome to the 90 T report conversations with members of the Harvard and Radcliffe class of 1992. I’m your host will Bachman. And I’m here today with Ty long. Ty, welcome to the show.
Tai Wong 00:16
Well, thank you so much. And thank you so much for doing this. And I doubt I’ve spent or met or spent any measurable time with at least two thirds of our class. And I’m not sure how many more I will get to meet or interact with meaningfully in the half a dozen or so reunions that we have left. So of the 49 people we’ve already had on the podcast, I think I only know seven. So as a practical matter, your project is going to let me spend an hour with many of my classmates who I never would otherwise get to know. It’s just become my go to podcast in the car. And my wife and daughter actually also listened to it separately. So thank you so much.
Will Bachman 00:54
You are welcome. I love that go to podcast. Alright. Thank you. So Ty, tell us, you know the format then tell us let’s start with tell us about your journey since graduating from Harvard.
Tai Wong 01:08
Sure. Well, I’ve been a trader. And I’ll get into that a little more in detail for 30 years. So let me start with by far, what is my best trade the biggest winner of the mall. Two years after graduation, I asked my girlfriend to marry me. We met in high school but only started dating after freshman year when she was at MIT. We got married after she finished business school and we have four children. You know, Solomon wrote that a wife of noble character is worth far more than rubies. And you know, over time, I really come to appreciate that. Because your life partner is the one trade you really really want to get right. If you don’t love this trade, you have any doubts? Walk away because if this trade goes wrong, your other winners will pale in comparison. So for me, it’s been a really good 27 years. And we’re in the process of raising four adults. Our our oldest daughter is in darkness. Our son is a freshman at Hillsdale. We have a daughter in the crucible of high school senior year, and our youngest is 13. As a family, we really enjoyed traveling together and laughing around the dinner table discussing politics, religion and the most entertaining news stories of the day.
Will Bachman 02:19
That is awesome. What’s one place that you’ve traveled as a family that you would particularly recommend?
Tai Wong 02:25
Oh, definitely Norway. We had our honeymoon in Norway in the fjord. And I do believe it is the most beautiful place on earth. Been to Alaska, Norway hasn’t been. We went there in 1996. And then, two or three years ago, we had a chance to bring the entire family. And that is really it’s a lovely trip. I wouldn’t recommend a I couldn’t recommend anything else more than Norway. I mean, there’s some places I want to get to in life, like Antarctica, which I haven’t gotten there yet. But right now it’s Norway, definitely without a second thought,
Will Bachman 03:00
Wow. I have not heard another person who did their honeymoon at the fjords of Norway. Tell us what if we go to Norway? What is the what is the thing to do? What would you recommend?
Tai Wong 03:15
If you have time, the easy way to do it is is with a cruise and it’ll stop at a few ports. The right way to do it. If you have time is you want to go June July in the summer, where there’s the maximum amount of sun in the north of Norway and rent a car and just drive up the fjords. I got I maybe got up halfway up the country. Man at some point, I would love to get into the far north, probably after I’m retired and I can do this again. Just remember that it gets very, very cold there and it can get rainy. So you know we were 26 years old. And you know, we weren’t experienced travelers at the time. And literally every day we were every single article of clothing we had because it got so chilly. But, you know, dress warmly, you have a lovely time. The only drawback is the food isn’t great. And it is quite expensive as most of Scandinavia happens to be and the funny story once is one morning I decided to have peanut butter and jelly on on on bread. And it looked like peanut butter but as I found out because it tasted a little unusual with something called gi toast which is goat cheese. So I was having goat cheese and jelly sandwiches.
Will Bachman 04:30
That sounds delicious. Actually. We we missed each other by just a couple of months. I the last time I was in Norway. No last time was no it was 1996 we pulled in for a port call with my submarine for after we were on station for a while and we had pulling into Bergen. We had the biggest seas I had experienced in my whole time in the Submarine Force where we were on the surface of course pulling in And we had, I think it was 30 degree rolls to either direction. I mean, I had never seen it like that before. You had experienced officers and enlisted guys getting seasick. I mean, strapping yourself into the seats just I’ve never seen anything like a crazy season, we had a wonderful time in Bergen. Amazing. On the fjord, they’re taking a walk around the city. And then I took a train to Oslo is the only city in the world. Well, it’s the only city I visited, where you can go to the central park of Oslo, and rent skis, and a little ski hill, in Oslo, where you could take a ski lift to the top and ski down it was, it was pretty great. So I had met big thumbs up for Norway, in my book. Okay, so I got you off track, I asked you about your journey. Tell us about keep going?
Tai Wong 05:53
Well, I guess we are professionally, you know, go to my my, you know, my day job as a trader, because I really think of my job my my real job as being, you know, sort of, you know, a father and a husband, you know, and a son, you know, when my parents were still alive, but professionally, you know, when we graduated was the early 1990s. And I was really interested in Wall Street. So after junior year, I got a summer internship at JP Morgan on the foreign exchange trading desk, and I had a blast. It was intense, and fun with a great team of people. And I thought, this is exactly what I want to do. And as a direct result of that internship, I’ve been a trader for 30 years. But so let me make just a step back and define that for many of our classmates who might not be in finance. So I’m a sell side trader, which means typically, I work for a bank, and I price and facilitate client business, as well as make bets with the institution’s money. The Volcker Rule notwithstanding, we’re also known as market makers. On the other hand, by side traders, are those who work for hedge funds, or real money mutual funds, and are typically clients of the banks and clients or clients of mine. I spent eight years after graduation and currency training, training cash, or what we call spot as well as options on those on those currencies. Then, in the early 2009, I remember this very well, my boss said to me, they’re building some newfangled trading system in Zurich, you go there and make sure that for three weeks, and you know, make sure they don’t screw it up. And that three years, that three weeks became five years. And so in the early 2000s, I helped build the first successful large scale client trading platform for currencies that made UBS the number one player in the space for a number of years. But by the mid 2000s, I did want to get back into markets directly. And you know, an opportunity to start trading precious metals. So precious metals, for those who are not in the markets includes gold, silver, platinum, and palladium. And I’ve also been active in base metals, very important for industry like copper, aluminum, and nickel. So I’ve been doing metals for the last 15 years or so, total, 30 years, 15 years in currencies and 15 years in metals. One of the things that, you know, I reflected on is how much being a trader, you know, what impact that had on my personality, on a trading floor, or at least on the old style trading for which you learn to be direct, and loud, and you have to be very decisive. Decisions are made rapidly, often in seconds, and only with what information is available, which sometimes is not very much at all. One of the things one of the old adages is trading is hours of sheer boredom punctuated by moments of complete panic. And you also learned to get over bad decisions quickly. And immediately you make a wrong price, you lose money, you close out the trade and move on. You also learn to develop a thick skin because people will yell at you and say nasty things. And then you know, afterwards, it’s all fine, but it’s part of the business. But, you know, as a trader, you learn to distill what’s relevant and what’s not. You know, I traders and myself were very skeptical of authority. And we intensely dislike sort of arbitrary and senseless rules. And we’re also usually outspoken about it. And I reflect again, if I’d done an internship in investment banking, or consulting, or something else and got into another business, I think my personality would have developed very differently, which is a sobering thought and what you do really impact sometimes can really impact the person that you are. You know, what are the things that I you know, one of the great things about being a trader is I’ve been in the trenches for all the crisis crises of the last generation, Asian currency devaluations and 1997 long term capital in the Russian problem 9098 September 11. Like remember that, you know, indelibly in my memory is, you know, as the markets move when we watch the play Things go in. And then the great financial crisis and the pandemic. I mean, in fact, I had, I had just recently started at Lehman Brothers, when it went bankrupt in Cyprus in September of 2000, of 2008. And I remember, it was a really good opportunity to go to Lehman Brothers, just a few months before that, and that thought process in my thought process, I said, Well, no, they bailed out Bear Stearns, they never would have bet, let a bank like Lehman fall now that would be a disaster. Well, I didn’t manage to talk to the colonial masters at Barclays, who bought Lehman Brothers to take me on. So I did manage to do okay on that, unlike many of my colleagues and friends, in fact, that people interested the movie, The Big Short, you know, really a good recounting of that episode. And it’s almost 100%, right? Except for the last bit when they went up to what was purportedly Lehman’s trading floor, and it sat empty. That wasn’t right, because we all went, most of us went to work every day after they went bankrupt, because we didn’t know what else to do. And there you know, you had access to news, you could speak to your friends and colleagues. And the one wonderful thing is the paychecks even though the bank was bankrupt, never stopped coming.
Will Bachman 11:17
I did not know that. Tell me a bit more about what a metals trader actually does. And my question around it is flavored a little bit or colored a little bit. Point what’s I think, what is it masters of the world or something, I just just read this book of the universe, Masters of the Universe, I, I’ll have to look it up. I’ll have to look at the title here while we’re chatting. But I just read a book about basically metals trading around the world, and fascinating. It seemed, I mean, that talked about more, maybe the buy side of these people who are kind of going and often, you know, maybe corrupt or giving bribes to government officials to get certain access to whatever. But from the sell side, tell me just a little bit about what it’s like, and what makes, you know, what is it that separates a good trader from a bad trader? And, and what are the kinds of decisions you’re needing to make? I mean, from the outside, it would just think, like, okay, you know, the price of gold or copper right now is, you know, x, so you, someone gives you, or wants to sell you some you just buy it, right? What, or sell it at whatever price it is. So, tell us, what are some of the complexities here? And how do you? How do you get good at it? What, what are you actually doing?
Tai Wong 12:36
Okay, so there’s some, hopefully, I can give you some interesting insights there. The first, the first thing I would say is, you know, a market is a market is a market. You know, they all have some similarities, but you do have to understand and appreciate the nuances of each one. And, you know, sort of the jargon around it. So let me in terms of metals trading, well, I’ll break it into sort of two parts. The precious metals trading is, you know, gold, silver, platinum, and an element called palladium, which most people may not have heard of, but it’s what goes into gasoline, catalytic converters, and one of the reasons why catalytic converters get stolen by thieves, because they can recycle that material. And you know, it’s pretty expensive material. So palladium, for example, is around $1,400 An ounce it wasn’t as high as over 3000, a year ago, when, when the Russians invaded Ukraine, because Russia is a big supplier of that metal. And we were people were concerned that there would be a serious interruption, there wasn’t because I think the United States government and other governments understood how important that element was, and they never put it on a restricted list. So So for example, if you know, as a gold trader for a bank, I’d have a client like a mining company, say a South African mining company, and or Canadian mining company, and they have gold that they’re digging out of the ground that they want to sell. So they sell that over time. So they would call up and say, you know, I have $5,000 to sell what’s your price for it. And that’s fairly straightforward and, and relatively easy. On the other side, you do get, you get CTAs or investors who are looking to buy a deal could look to buy or sell metal, some of them are friendly, some of them a little more aggressive. So it’s not unusual to have someone ask you for a price and 25,000 or 50,000 ounces of gold, and they won’t tell you which side they want to do. So you have to show them a two way price. And you want to you want them to continue to call you so you show them a tight to a price, which there’s an element of risk. You know, the market suddenly moves forward against you. If you know they know something that you don’t know what you learn. If somebody you know, who doesn’t really ask for prices at three o’clock in the afternoon, comes in and asks For a price and something large, and for that time of day, they probably got some information that you didn’t know. And you have to decide, you probably decide I since, you know, there’s an element of risk here, I’m going to move out of this trade out of this position very, very quickly. So that’s precious metals. And also, you know, I would quote options on on on the movement of metals, which you know, calls and puts, typically, the mining companies like to do that to like a broad buy protection with puts, they don’t want to pay any premium. So they’ll sell a call against it, and we price things like that, that market is largely futures based. So you trade out of your risk in the futures, just very quickly, before I bore the heck out of our listeners, in base metals, like copper and nickel and aluminum, the structure is very, very different. The trading is based in London. And, you know, it’s a much more physical centered market where the actual deliveries of aluminum and copper and nickel matter a lot. And, you know, what we call the forward curves are very, very important. So, you know, as an example, if you were, you know, if you were short, you wanted to be short, aluminum, of borrowing costs, and aluminum could move 300% in a day, if you wanted to roll that short position, and though these are really important metals for, you know, for sort of the world industry, and it turns out that China is the marginal user, most of these base metals, and they’re 50% of the market. So you really have to pay attention to China, in that case. So moving on to what makes a trader successful. I think you have to be aware of what’s going on in global markets, you have to be aware of your own market. But most importantly, and it’s true, and you know, many markets, but certainly true and metals and sort of any metal that is relatively illiquid, as you have to understand your liquidity constraints were so let’s say at 10 o’clock in the morning, if a client wanted, say 5000 ounces of palladium, you could trade out of that, that’s still a big amount. But you can trade out of that, if they wanted the same, same amount of palladium price, three o’clock in the afternoon. Liquidity is much, much less, you may have to hold some of that position overnight. And the market is somewhat discontinuous. It may not trade significantly for eight hours after the you know, the mid or late afternoon in New York. So in that case, you’re saying, I’m quoting this price, if I have to hold it overnight, you know, how why do I need to make it what kind of risk Am I willing to take? So understanding the the nuances and the the price action, liquidity of every market is probably the most important thing. And the other thing is to limit your risk. I mean, I remember famously, last few months, the young lady who was in charge of Alameda research said, Oh, we never used any stop losses, which was really sort of flabbergasting, where you want to be able to, to know that. There’s a price at which I can get out or approximately where I can get out. And, you know, crypto is a place where I think a lot of places could have used an adult in the room and David Mamet.
Will Bachman 18:35
So unlike the stock market, I’m hearing where it’s a bit more anonymous and automated. It sounds like in metals, if you’re trying to do something above just the retail level of trade, it’s more of a one on one negotiated price.
Tai Wong 18:57
You do get more of that in sort of the non equities markets. But you bring up actually a very, very interesting point over I would say, certainly over the past 10 years. And the reason I know this, and nor I discovered this, I should say, is a number of years back there was December, late in the year bonuses were largely aside and I was a little bored. And I started to look at you know, what kind of you know, what the price action in specific markets. So when I studied markets, like gold, silver, actually was crude and natural gas over a number of days and relatively quiet markets. I found that about 80% of the trades were one and two lot trades at ADM 80% of the number of trades, not the volume, one and two long trades. And what that means is no human trades in one or two lots, only machines. So functionally 80% of the trading today is done by machine. So you know I would Say I would quote, you actually use the, quote 50,000 ounces of gold, you actually quote that a lot less often now, because that execution is often given to a machine. So instead of asking me for a price, and I price it in one shot, the machine would actually say, Okay, you program it to say, I have half an hour to do this. And, you know, so that’s however many seconds how many lots I need to do in, you know, in a minute, and it just slowly executes that over time, that takes the human element out of it. And you also now don’t, it’s become very anonymous. So it’s really, you know, sort of machines over the human, you know, we try to figure out what the machines are doing. But it is a lot less, you know, one on one like it was before, I think equities got there ahead of us. But most markets are, you know, headed in a similar way, sort of, you know, by hook or by crook. And the other thing I should mention is, you know, people who are in the financial markets or who following you know, you probably know something about spoofing, which is a crime, where traders would actually show a lot of offers or show a lot of bids to try to nudge the market a certain way. And what they’re really trying to do is fool the machines, because the machines run the market. And, you know, traders got tired of it. And some of them tried to fool the machines. It wasn’t illegal until 2000, I think about 2011. But, you know, it’s been made illegal since then. I don’t think it’s a very good law. As a matter of fact, one of our classmates was a very prominent attorney tried to get that overturned to the Supreme Court, but the court wouldn’t take the case. It’s just sort of the machines have free rein to do whatever they want to do. But humans, they did the same thing as machines, it’s a crime. So there’s really an element of, you know, certainly, you know, unfairness or unfairness in that. But be that as a May, is a crime, you know, I’ve never done it, I wouldn’t do it. Because no matter how much extra money you make, or what satisfaction you get out of it, it’s never worth going to jail.
Will Bachman 22:09
What is your day, like in terms of, are you sitting there with, you know, a specialized software tool, or just an Excel spreadsheet of some kind, keeping track of all these trades and calculating, I mean, it’s one thing if you’re just doing these cash trades, but all the complex futures and calls and puts to monitor your risk position with what’s the sort of the minute to minute hour to hour like.
Tai Wong 22:34
So, typically, you the first thing you do when you wake up is you know, you’re you’re looking at your Bloomberg to see your Bloomberg on your phone to see where everything is move. Since you last checked it probably five hours before you went to sleep. You spend you scan the headlines, maybe when you’re, you know in the train going in, is to get a sense of what has gone on. You get to the office, you launch, you know Bloomberg is is a remarkable tool is the 800 pound gorilla there is no actually done monopoly, there is no substitute for Bloomberg because it tracks an immense amount of data, which is why per person they charge $3,000 a month, and I think they have 250,000 users per month. So that’s about seven $8 billion, that they can pile on the rest of the businesses why Mike Bloomberg is so successful, your Bloomberg shows you you go into the office log in the Bloomberg, you probably logged in overnight, or left open all your pricing tools for options, all your sheets that show you where your risk, your risk is, and that depends on, you know, where the market has moved, how much volatility is moved, and sometimes how much interest rates a move. So, you know, most of us are in front of an array of you know, three or four very, very large screens. And then you have trading tools where you can access futures and liquidity. So it’s, you know, for some people who who’ve never done it, it just seems sort of like, like mass confusion. The only thing I can compare it to is, it must be how we all feel when we look at what air traffic controllers have to do. Except, you know, if I mess up, you know, I might lose a little money if the air traffic controller messes up. That’s a much bigger problem. Yeah.
Will Bachman 24:20
Bring me into your head. Give us an example of one potential trade, not the simplest one, but not the most complex one, just something of moderate. And a buyer reaches out to you. Or a producer, let’s say, give me just an example of what they might say to you like their actual words and what you would say including the jargon, and then what you’re saying to them and kind of what your thought process is of, you know, how to figure out you know, on all the calculations, their reputation to that person, how loyal they are to you or how likely they are to go to competitor or your interactions in the past. Just give us an example of say sanitized of, of a trade
Tai Wong 25:05
so I’ll give you a, a sort of a not really a complex trade. So let’s say a mining company says to me, you know, a tie, I want to hedge my the goal that we had some of the goals that we have coming out of our minds in calendar year 2024. And I want to do 10,000 ounces, you know, on average per month, you know, for that entire year, I would like to buy a put at 1700, what call what I have to sell to make that zero cost? So I look at the media I would look at, okay, so we’re spot right now it’s about 1860 1700, I have to look at see if the Fords have moved, because I’ve loaded the Ford prices and the volatilities in, you know, probably earlier in the day, I’ve refreshed them from time to time, I check and see if the volatilities have moved, if the Fords have moved, and then I calculate, okay, so if you wanted to buy a 1700, he’d have to sell me, you know, he have to, you know, in theory would have to sell me, let’s call it a 2000 call, but I can’t do that, because I have to, I have to factor in, I’m gonna have to hedge this trade. So I would need to we measure options in volatility, so I may have to take one ball on it. And that would reduce instead of a 2000 called, I would tell him, I can only you know, I would only sell him a 1970 call, which is more valuable. And then I have to think, oh, what’s his, you know, what’s his? How risky is this client? You know, you see a good risk is the medium risk? Oh, I have to adjust a little bit for a risk. And then I’d say, Okay, well, instead of 2019 50. And I’d go them and say, you know, for a 1700 put zero cost, I would show you a 19 You know, a 1950 call, and he would come back, it was like, give me a second, I guess well, you know, I’m seeing 1955. You know, I can give you the trade, you know, if you can match it, and I do the calculation 1955 That might be worth in theory, let’s just pick a number $25,000 on that trade. And I’d said you know what, this is a good client, the salesperson would really want this trade, we’ll do it 1955 He says, Okay, you’re done. And the first thing that I have to do immediately is because, you know, I’ve sold a downside option, and I bought an upside option. That makes me that makes me theoretically long gold. So the first thing I have to do is start selling gold. So I have my my spot or cash hedge in place. And then I worry about the volatilities. And at some point, I worry about the forwards. So sort of in a nutshell, that’s what’s going through my mind. And you know, in a few minutes, if that’s how long it takes for the trade to happen, hopefully that’s relatively clear.
Will Bachman 28:09
That is not 100%. Clear. But it was amazing to hear the discussion of the some of the things. So let me see if I got it. So they are producing some gold, and they don’t want to pay dollars necessarily received dollars right now. But they want a put, which means they would say we don’t want, we want to make sure that we can sell our gold for at least 1700. So if the price drops to 1600, we’re going to sell it to tie at 1700. Right. And they exactly what and they would normally have to pay a fee just to get that right to do that, because there’s a chance that you’re going to lose money. And obviously, if the price is above that, they’re, they’re not going to use it. So you only have downside on that. But then the flip side is they’re going to, you know, give you or sell you basically a call, which means that if the price goes up to $2,500 an ounce, then you have the right to go and buy it from them at 1955. So you’re gonna make upside dollars there.
Tai Wong 29:10
You must be an option trader. That’s exactly right. Okay,
Will Bachman 29:13
I falling along a little bit. Okay. So then, so you’re so you, they gave you the 1700 number. So what you were trying to solve for is to say, Okay, what’s the number in terms of 1950 1955 1980 Whatever, that would sort of balance it out for me where I can still make a decent expected margin on it. Now, you’re not guaranteed to make anything because the price could say at 1800 and it was just a nice conversation and nothing comes of it. But there’s a chance that you’re gonna lose money, they’re just gonna make money and you’re trying to say on average, I need to make money on these trades or I don’t get to, you know, you know, go on trips to Norway.
Tai Wong 29:48
That’s That’s right. And so what you have to do the your immediate exposure there is as soon as he says, Okay, you’re done. If he doesn’t, if he doesn’t You know, give you the hedge with which a corporate would never do, you’re responsible for getting that hedge off. So immediately, I’m short, a put long a call that on both ends of that trade that makes me naturally long. So I have to sell that in the market. And the market right now, let’s say is 1860? Or was the last time we looked at, let’s say, you know, some, you know, Jay Powell comes out, you know, a news conference and, you know, says, you know, we’re really, you know, what we’ve seen today in the payrolls number, well, we think we’re gonna go, you know, 50 basis points in the March meeting, he’s not gonna say it like that, but let’s say somebody does, gold could drop $10 in an instant. And if my hedge was, you know, again, for the sake of argument, my, let’s say, my hedge on that, you know, on that was, you know, 20,000 ounces of gold, if it drops, $10, I’m out $200,000, instantly. So you, you really, you know, so part of it is you have to know, what data is coming out what time, you know, data is coming out, generally. So if, you know, somebody said, oh, you know, I want to quit calling at 10 o’clock. And, you know, there’s a number out, you’ll say, Wait, let’s wait for the number, I want to see the number because, you know, that’s a coin flip, it could go really, for me or against me, and you have to have a sense of, you know, what’s, you know, what’s going on, if there’s a speaker do, you know, are real calculations that you do in the back of your head, that you sort of know, ahead of time, hopefully, that helps.
Will Bachman 31:29
Tell me about the reputations of not not naming names, but what are the types of counterparties that you interact with? Are there some people that you can, you know, you know, that they’re always very kind of aggressive and sharp traders, and some people that are more like loyal, and no, you know, just take like a reasonable deal and not push you too hard. Or there’s some people that you can’t trust what they say, or like, they say, Okay, we’re done, but then maybe they don’t sign the paperwork later, or just what doesn’t like the different kinds of flavors of people you interact with.
Tai Wong 32:03
So if you’re dealing generally dealing with corporates, is they tend to be a little less aggressive, you know, that there’s a relationship, there’s typically of a corporate stealing, but me, most likely the bank is lending the money. So there’s, you know, there’s other parts of the relationship. So, you know, they may be, they may be, some are more aggressive, some are easier, some will, you know, shop the price with, you know, three or four different banks, you know, some will only deal with two and occasionally one will only deal with you, you know, if they, you know, have a level of comfort with you. So corporates, not always, but generally are, you know, more straightforward that way, there are some corporate who are very aggressive because they may be former self I traders, you know, who really want to get the absolutely the best price. The sort of the hedge fund, CTA types are often looking for, you know, a quick buck look at, you know, they’ve got some information, and they need to act very, very quickly on it. And there are there, you know, it changes over time, but, you know, they’re, you know, they’re certain hedge funds that, you know, are very aggressive. And when you quote them, you quote them, and you get out immediately, if you’d like, the way that they’re going, you know, you may face sell 100,000 ounces of gold, you might sell 120, and go with them. Because these guys have a history of either being right, or getting, you know, access to certain information. The, you know, mutual funds often are, you know, doing a hedge, but that’s usually competed. So you’re also aware of enlarge trades, if a client is what we call shopping it or show it to different banks, that if you if you win the trade, at least two or three other people know that somebody else won the trade, and they may, you know, move in the market to you know, if you know that, if you’ve been caught, you know, ask for a price and call it a million ounces of silver. And you know, this client shops, and you missed the trade, you’d like to sell a little silver because you forget somebody else got that trade, and we’ll have a million ounces to sell million ounces, not a lot, but they’ll certainly impact the market a little bit. So that’s also a risk that we consider when we quote a client if the client is you know, is asking away
Will Bachman 34:23
would you sometimes if there’s clients that you know, historically just ping you a lot of times ask for quotes all the time and never you know, transact Would you just refuse to deal with them in the future and say, You’re too much trouble wasting my time.
Tai Wong 34:37
Generally, that’s, you know, you we will do we will talk to the salespeople, and depending on whether this client, you know, does other things with the your institution that may be profitable, you could have a sense where, or they’re a really profitable customer of the, of the fixed income desk, so, you know, just be nice to them. So you end up showing them some prices that are not the most aggressive So but you know, are defensible, or you win one trade out of 10. So you have to be sort of a little politic about it sometimes, you know, as much as you know, you know, you know, we don’t like to be, you know, you know, as traders, like, who would say, I’m not your broker? Why you keep asking me these prices, you know where they are, why are you bugging me, but sometimes you just, you know, you play the game and say, you beat your short of beat a good soldier. And, you know, you get the specific clients where, you know, they may have a link, you know, to the C suite, and you’re really, really nice for those clients, because it doesn’t matter. And I told young traders, if I’m not here, and this person asked, show them on tight price, I do not care if you lose money, because they complain, the call doesn’t go to me or your or my boss, or his boss, it’s going to the CFO, there is no price with that forum, a nice price. And we’ll just deal with it later. You don’t have to do that very often. But from time to time, you know, which clients you have to work with that way.
Will Bachman 36:00
Give me some interesting jargon or terms that you have in the interest in the industry of trading. Not so much the technical piece of calls or puts, but are there things that you call like, you know, traders that are just not very good at what they do, or that are, you know, like big traders that lose a lot of money or the traders that always take the wrong side. I don’t know, I’m just curious if there’s any kind of colorful terms that you’re willing to share on the air here.
Tai Wong 36:31
Colorful terms, at least, let me think about it. And the sad thing is the trading floors have gotten much less colorful, over, you know, over recent years, you know, we’re taught to be a lot more sensitive, and there is also a lot of a lot less screaming and yelling as they used to be when I started, you know, you would have 30 salespeople sitting in like stadium seating, you know, sometimes one phone or two phones in different years talking to two different customers. Well, what’s the Bloomberg today? Instead of 30 people talking to 60 customers, I can actually update those customers, and they can ask me for prices with one keystroke, I would just say, you know, Powell answers that 50 basis points is on the table return. And then you know, everybody on Bloomberg gets that or you know, volatilities are moving sharply lower because the price is rallying return and 60 clients see that instantly. So a lot less shouting, and yelling, I would say the one of the most colorful episodes, not so much jargon was back in the old days, when there were all the salespeople. A salesperson, when they asked for a price is supposed to do some very basic things. They just tell you who it is, you know, you know, the currency, and the amount and the side if they know it, and one salesperson dealt with, you know, very important clients got up and asked the head of the desk, you know, I need a price, whatever it was a substantial price. And it might be two or maybe it was 200 million Sterling, which is the jargon for British pounds sterling or cable. You know, where are you? And 200 million pounds. And the the trade the head trader said Who is it, and the salesperson in advisedly said you give me the price. And I’ll give you the name. And the trader got so angry. He took it over an old style, you know those black phones are virtually indestructible. And this 225 pound man swung it as hard as he can, as he could against the desk. And he missed he missed the desk. I was sitting right next to him and I bailed out. I just jumped out, he swung again. And the phone broke into like 1000 pieces. There were meetings. And the first thing you do is you knew the guy did that. So we would keep extra phones on the desk, be able to plug in immediately that new phone and be able to trade but that was a really really memorable time. But I bailed out because I you know, he missed, you know, as hard as he could. And then I might if he hits this not gonna go well. That was back when it was more fun. A little more animated. Oh, boy. You know, I mean, the thing is, you know, half an hour later, certainly the next day, you know, it’s all it’s mostly forgotten, you know, passions were high things would happen. I mean, it’s it was fun. We don’t do that. You know that that rarely happens anymore if ever but the good old days.
Will Bachman 39:36
Next set the next part of the show, I always ask tell us about any courses or professors in college that continue to resonate with you.
Tai Wong 39:49
You know, I you know, some regrets that I had was I wasn’t more sort of academically oriented. I really just want to get get to Wall Street get started with Michael Beer. And you know, there are some courses in retrospect that I wished I had taken. You know, Harvey c minus Mansfield, I was thinking, why would I want to hurt myself and get a C minus and, you know, I regret that I never took one of his classes at least pass fail. But in terms of the people that I remember, you know, Martin Feldstein American economic policy. It was a big class, but he really had, you know, really good things to say he talked about, you know, we should tax consumption instead of, you know, instead of investment. You know, I really think he should have been Fed chair at one point, you know, instead of Ben Bernanke, but I think he was on the wrong side of the aisle. I remember one of the things that I never thought I would take, and it was because our tutor at Mather house Joe gams, and I had to take an art class for one year for one of the course. And he said, Well, why don’t you try Michelangelo. And I went in, you know, what some doubt. And I think John Sherman maybe was the professor. And it was a really good course. And you come to appreciate late, appreciate it later, when, you know, the first time I went to, you know, once visited Vatican City, and it was with my roommate, and a dear, dear friend, who’s also been on the podcast, Father, Roger Landry had shown us around St. St. Peters, and I saw the theater for the first time. And you’re amazing, you remember what they taught you about that sculpture, which is, you know, the most remarkable thing I have ever seen. And I had an appreciation for it, because I took that course. So in some ways, of course, that I didn’t want to take and had to take turn out to be sort of really memorable. You go to the Florence and you see the David and you remember, oh my goodness, I you know, I learned about that. Other things that I remember. And it’s one of those things where you know how markets always surprise you. And history too. You never know what’s, you know, what’s going to happen as roe Bogle and I don’t remember the name of the course, but it was focused on Japan. And one of the books was Japan as number one
Will Bachman 42:07
industrial EastAsia foreign cultures. 26. You
Tai Wong 42:10
got it? Did
Will Bachman 42:11
you take that freshman year?
Tai Wong 42:13
I think I must have taken that, you know, maybe sophomore year, I don’t think it was freshman year. And my goodness, that was the high of highs of Japan as an economy, you know, maybe, maybe, you know, maybe as a country that given their terrible demographics. But I remember that so well, but we, you know, we have to be like Japan, and our classmates who are studying Japanese and POF Wow, that was a bit of a surprise. And then we saw that one coming. And then the last, what I would say is Richard pipes, you know, the Russian Revolution. I mean, you know, the, the wealth of knowledge collected by that man about the Russian Revolution was really, really, really remarkable. So some of the things that I you know, that I remember, but I wish I’d been, I had the foresight that they may be a little bit more academically oriented.
Will Bachman 43:03
All right, Ty, for listeners that would like to follow up with you, or check out what you’re doing, where would you point them online?
Tai Wong 43:11
I would say, you know, send me an email, it’s, you know, email@example.com you can get you can get me through LinkedIn, not a lot of guys in Taiwan with my, my Tinder photo on it. It’ll be the same headshot I send you I think, and, you know, or, you know, you know, or you know, or text me but love to hear from you, and love to reconnect with, you know, some folks that, you know, may or may not have talked to in a long time or people who are just sort of interested in the markets and interested in making a connection.
Will Bachman 43:42
Taiwan trader love your story. Thank you so much for joining us today. And we definitely appreciate hearing you we’ll include those links in the show notes.
Tai Wong 43:52
Well, thanks again, so much for doing this.