"Get Attached To The Objective, Not The Object" - The Gambler

I received feedback from readers that they liked the dialogue type of story telling. So, I decided to continue my blog series as a dialogue between myself and The Gambler. I rate "Conversation with God" series as one of the best books to read. I will try to get my notes into this interaction between myself and The Gambler. Obviously, this article and the ones following will be fictionalized dramatization of the topic being covered. So, now lets start with chapter 2. If you have not read the earlier post, I would recommend first read it and then read this one. The first post is titled "Poor use Statistics, Wealthy use Math".?

It had been a few months since my interaction with The Gambler. The Gambler had instructed me to keep putting my money into a liquid fund on a regular basis with strict discipline. I had just made the deposit for this month and was looking at my statement. The balance read Rupees 900,000. That number did feel good.?

As I stepped out of the finance firm's branch, I met with The Gambler leaning on the railing.?

I said, "Hello There. What a surprise! It has been so long, I almost forgot you. Well, what brings you here?"

The Gambler muttered something under breath. I could bet I heard something like "When the student is ready, the Guru will appear." I wanted to confirm. I said, "Did you say something."

The Gambler replied, "Nah. Nothing important. From your eyes, I notice you are happy about something today."

I showed The Gambler my statement. I was proud to see the recognition in the eyes as they scanned the balance amount.?

The Gambler, giving me back my statement, said, "I say, why don't you go back in there and get a statement from the manager that you pledge 20% of this amount to the bearer of your IOU."

I wanted to protest, but knew better than to argue with The Gambler. I did as I was told and was back on the streets in 20 minutes. The Gambler was waiting for me.?

The Gambler indicated to me to walk along and stated, "Time to go to the market mister. You always wanted to buy some stocks. Say, why don't we go to the market and get you some stocks."?

I just trotted along. I was hopping to get some more advice while we walked to the market. But there was silence;?and our steps were measured and hurried towards the market arena.?

I entered the market along with The Gambler. As usual, I moved towards the area of the brokers. I felt a tap on my shoulder and realized The Gambler was indicating I follow in the other direction. The man at the desk seemed to know The Gambler. He hardly looked at the card The Gambler presented and waved through. The Gambler took my statement and letter from my hand and showed it to the man. After a brief conversation, the man looked at me and waved me through.?

The Gambler said to me, "The side you were moving towards is for the retailers. This area, we walking towards, is for the wholesale market. This is where the wealthy traders transact."

I was surprised. I replied, "I did not know there are two markets for stock."

The Gambler shaking head said, "No. No. It is the same market. Just this side gives a different perspective. Now, come on, let us get you some stocks."

We reached the area where there were lot of buy and sell happening. Trades were being transacted at every point, at every second. I did not see The Gambler try to get some stocks for me to buy. I asked when we would buy and go back home.?

The Gambler looked at me and smiled. "You are young as a trader and very eager. I have spent a lot of days living. Time is important. It is the only vector that moves unidirectional. So, why not enjoy time while we are in this moment?"

It was my turn to mutter under my breadth, "Sigh. Another philosophical statement."

The Gambler said, "You see the trades happening. These are eager people. And often haste makes people take wrong decision. The market will be here long after both of us are dead and gone. So, we will wait and watch."

I asked, "What are we watching for? I see stocks being ready to sell and we are here to buy. So, why not we buy and go home."

The Gambler gave a very knowing look and said, "We watch for those who are waiting and watching."

After some time, The Gambler tapped me and said, "Time to go make our transaction. Come on and watch and learn. We found someone to talk to."?

With that, we walked over to a trader desk. The person was having stacks of stocks apparently for sell but was not too eager to rush to get buyers. The Gambler started talking with the trader.?

"So, friend, what are you waiting for?"?

The trader replied, "I have these stocks. I know I can get 18,000 for each. It is a combination of the best companies in market and called the Nifty. I am waiting for a buyer who will be ready to buy them for me at 18,000. These stocks are bundled in units of 50."

I did a quick calculation - 18,000 x 50 = 900,000. Just the money I had accumulated. I was tempted to tug The Gambler's sleeve and state that I can buy the same. But I knew better and kept quiet. The Gambler had instructed -"watch and learn."

The Gambler said, "My friend, I see the market price is 17,105. Are you sure you will get a buyer for 18,000."

The trader said, "I know the value is 18,000. I am willing to wait."

The Gambler replied, "What if the price falls to less than 16,500 by end of day?"

The trader seemed irritated, but as a business person, he kept his calm. He said, "I know what you mean. In this case, perhaps I will sell maybe one or two bundles and go home for the day."

The Gambler continued, "What if the price falls to less than 16,000? Wont that be scary."

The trader seemed to be?doing some calculation in his mind. He stated, "I agree. So what is your point?"

The Gambler winked at me and replied to the trader, "I have a proposition. My friend here wants to buy one bundle. Say if the price?drops to below 16,400 he will buy it from you at 16,400 at end of day. Even if the price ends at 16,000, he will still buy it at 16,400. If the price is above 16,400 then you can sell it to any other buyer. So you have nothing to lose."

The trader liked this idea and immediately agreed. The Gambler continued, "But as we agree to buy it at 16,400 even if price falls below it, we are taking the risk and want a premium for this."

The trader replied, "This sounds fair. What is the premium you want?"

The Gambler looked up a table titled option chart and said "The premium rate for 16,400 seems to be 120. Let's seal the contract at this price."

The trader agreed and all three of us walked up to the regulator. The regulator made a note of the transaction and then looked at me. He said, "You will need to provide a guarantee that you can and will buy the bundle even if the price is falling."

The Gambler hinted at the pledge letter and I presented it to the regulator. He kept the letter and seemed pleased with it. The trader paid 6,000 rupees (120 rupees x 50 units for one bundle) to me and we agreed to meet at end of day if price is below 16,400.?

The Gambler instructed me to enjoy myself in the lounge and meet again at end of the day.?

I kept myself entertained by watching and noting some events happening in the lounge. I decided to ask about them to The Gambler later.?

Towards the end of the day, The Gambler joined me and we watched the live board for the price. The price of the stock was around 17,400 at the end of day. The Gambler smiled at me and said, "Let's go and get that pledge letter. We don't need to buy the bundle from that trader. He will not sell it to us at 16,400. So, we get to keep the premium he gave us."?

The regulator returned the letter to me with the contract note. The date showed end of month. The Gambler smiled and remarked, "Time flies when you having fun and no stress. One day with me is one month in earthly calendar."?

Another one of those statements that I was slowly getting used to.?

As we walked back, I was feeling a bit sad that I could not buy some stocks from the market. It was one month since I accumulated the 900,000 in my account. I shared this with The Gambler.?

As we walked past the finance company branch, The Gambler asked me to go in and check value of the account and deposit the 6,000. Then we went for a drink.?

The Gambler started explaining the day (month) for me. "My dear protege, we started the day with 900,000. You just deposited 6,000 into the account that we collected from the trader. How much was your account balance?"

I said, "The manager told me the 900,000 earned an interest of 3,750 at 5% annual rate of interest. The pledge of costed me 300. So, my balance reads 903,450."

The Gambler smiled and took a tissue paper. He said, "Time for some tissue paper planning. At end of the period, you have 3,450 in bank interest and we left market with 6,000 rupees in our pocket. So, we got 9,450 with our 900,000. That works out to 1.05% return in one month. At this rate, we would be clocking a compounding return of 13.35% annually. Now, you wanted to buy stocks to earn some profit. Well, you did earn 9,450 today. Do not get attached to stocks. Get attached to the objective, not the object. The objective is to earn profit or income. The stock ownership is just a mechanism for it. A gardener knows this best. Even though he loves his plants, he knows he has to prune them to get them to grow better."?

This did cheer me up. On The Gambler's advice I continued doing the same for the next few months. I missed seeing The Gambler, but was enjoying the income I was generating every month. Till, one day, the stock price did drop below.... that is when I met The Gambler next.

I started reading and understanding the math behind the trading world. I will be sharing my notes in series of future articles. I am also forming a group of like-minded traders. If you are interested, kindly register at https://forms.gle/LN7sr77PFQL1bmRA7. You will receive details when I announce such programs.

Hope this was insightful read. Do leave your comments below.