Newspaper article The Evening Standard (London, England)

Worlds Apart, but DIY Investors Share Same Philosophies on Learning Curve

Newspaper article The Evening Standard (London, England)

Worlds Apart, but DIY Investors Share Same Philosophies on Learning Curve

Article excerpt


YOUNG, arrogant, stressed, City-based, hyperactive and relying on gut instinct rather than deep thought - that is roughly how a less-than-sympathetic British public tends to think of those who try to make a living from trading the markets.

It is an inaccurate picture. Fulltime, short-term investors are often older than the stereotype, they may work almost anywhere in the country, and many engage in serious analysis before they trade.

Take two examples - one based in the Big Smoke, the other sitting indoors on the Isle of Skye as the windows rattle on a " terribly windy and stormy day".

"John" is a 47-year-old Londoner who has made, and lost, millions on the markets during the past nine years.

He concentrates most of his effort on two types of investment - the shares of small companies and options.

"In 1994, I was in a deadend job, going nowhere," he says.

"I borrowed [pounds sterling]15,000 on credit cards and had built up a portfolio, to a high at one point in 1997, of [pounds sterling]1.4 million."

AMONG his early investment successes was a punt on infrastructure firm Jarvis. The shares jumped from 26p to almost 800p.

Since then, John says, he has had "some fat times and some bad times", losing more than [pounds sterling]1 million in the technology rout of 2000-02 but recovering substantially since then.

He analyses small-company stocks painstakingly.

He is keen on life science firms, making big sums on Biocompatibles a few years ago and now holding stakes in Bioprogress and Tepnel Life Sciences.

His approach to options is highly mathematical and short-term.

He makes at least one trade a week, usually going short of a put or call on the FTSE 100 or German Dax, via a spread bet with bookmaker Cantor Index.

This is a high-risk strategy, since a sudden, big market move can send the price of an option shooting up, hurting anyone with a short position very badly.

To reduce this risk, John uses "calendar spreads" - this might mean going short of a December option on the Footsie but long of a March option, the latter a hedge in case the former moves sharply the wrong way. …

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