The road to success is often paved with initial failures, Larry Benedict did two things consistently during his early career: losing money in trading, going bankrupt twice. Despite a complete lack evident that he had some ability to trade, Benedict persisted in his quest to become a successful trader, somehow managed to find another job as a trader after each failure, fortunately for Benedict, as it is not always the case Three strikes followed by the third was the win.
Ultimately, Benedict turned out to be as consistent as a trader, as when he was failing, Benedict’s transition point occurred in 1989, when he was hired by Spear, Leeds & Kellogg (SLK) to be an options specialist on the XMI index in the American stock exchange. As a specialist, Benedict gained a much needed experience and developed a sensitivity to the markets, when the volume of the XMI began to dry three years later, Benedict became a distributor of SLK derivatives. In 1993 the success of Benedict as a trader led him to be named the Special Limited Partner for the newly created patented trade department at SLK.
After Goldman Sachs bought SLK in 2000, Benedict set out to found his own trading firm, Banyan Equity Management. Risk management dominates Benedict’s approach, saying that being cautious is a euphemism, if his losses in any month approach 2.5%, Benedict will liquidate the entire portfolio and start with a blank slate the next day, negotiating in a reduced position size, typically, after a decrease of 2.0% to 2.5%, he will cut his unit size by half or less than the normal level.
Benedict will continue to operate at a smaller size until he starts earning money again, the rapidity with which Benedict cuts his exposure explains why he has never had a large monthly loss, his worst month in 13 years of operations (seven years in his fund and six years earlier in a managed account and proprietary account) was a moderate loss of 3.5%.
Originally posted 2020-12-26 09:07:20.