Cocoa futures are 32-year highs based on an export ban in the Ivory Coast. This should have been a joyous day for fund manager Anthony Ward, or as the British press dubbed him ‘Choc Finger.’ He initiated a huge position in cocoa back in the middle of 2010. However by the end of the year he had reportedly sold down that position. Throughout 2011 cocoa has only gone higher. Traders often say that being early is the same thing as being wrong. This is doubly true when your bet is too big relative to your portfolio. We don’t know whether Ward would have held on with a smaller position, but it certainly would have been easier. To profit a trader needs not only to get market direction correct, but either has to get the timing correct and/or the position sized so that they can eventually profit off of their thesis. In today’s screencast we look at the challenges of taking on too large a position in their portfolio.
Items mentioned in the above screencast:
Cocoa surges to a new high. (WSJ)
Daily price chart of cocoa futures. (Finviz)
Anthony Ward makes a big bet on cocoa. (Mail Online)
Choc Finger, nickname bestowed on a British fund manager who bought a vast quantity of cocoa beans. (Schott’s Vocab)
Anthony Ward sells out of his cocoa position. (WSJ)
Daily price chart of the iPath DJ-UBS Cocoa TR Sub-Index ETN (NIB). (Finviz)