Once a Trader Always a Trader

I met one of my mentors this week at his lawyer’s office. He’s getting old and wanted to make sure things are taken care of smoothly should he pass away. He asked me to be his executor of his will and other related legal matters. I accepted the responsibility with honour as he is putting his trust on me to take care of the well beings of his wife and daughters whom I know since I was fresh out of university. We went through the paperwork and then left the office for a drink at a nearby restaurant. I am going to share a story about my mentor.

The Thought of Preparing For the Inevitable

My mentor is old. He will be 81 years old soon. He is fit and active. Most people will think that he is just at his 60s. He, like many others coming from a different era, hates to take about setting up trust, preparing the will and the ultimate unlucky word, death.

Yet, he saw the mess his trading partner left behind when his untimely death caused both his family and business partners lots of troubles. Then he got the news from me about my significant other passed away last year. He finally made up his mind to put a will in place to handle things in orderly fashion should anything happen.

That’s how I come into the picture. My mentor called me and asked for a big favour. He could not believe I accepted the responsible immediately, no questions asked. After what I went through, I understand the concern he has and feel for him. Most important of all, how can I refuse the very person who shaped me into a good trader?

Trading Accounts Turn Out To Be A Very Sticky Issue

Trading accounts with margin is a very sensitive thing in a will. The problem is that the person who will inherit your assets are not supposed to inherit your liabilities. But a margin trading account, which include all futures trading accounts, with open positions can be facing risk that is over the total value of the account itself.

Hence a brokerage often insists to close out all the open positions when it is notified that the account holder has passed away. The brokerage needs to protect itself from the possibilities that the person who will take over the account cannot sue them for money that may not be there as the open positions may turn into losses more than the account balance can cover.

I learned about this when I setup my will many years ago. There are several solutions.

First, you can setup your trading account under a corporation, meaning that you need to create a corporation in the first place. This will give your heir the flexibility to hold onto trading positions that are using margin because your heir is taking over the corporation, not a trading account. The account stays the way it is.

Second, you can setup the trading account to be joint account. It can be complicated to do so because of taxation issues including your trading profits being treated as a split between you and your heir. Hence it is important to consult an accountant who understand the implications.

Third, you can assign someone with trading decision power to the account. This arrangement depends heavily on the country you reside in. There can be many complicated issues associated with the arrangement. If your brokerage allows that, it makes the transition much easier.

My Mentor Still Trades And He Rocks

My mentor retired from trading commodities professionally many years ago. Since then he has been playing with the stock market to keep himself busy. His favour play is to “short the sh*t” out of the highflying story stocks. This strategy works very well even though we have the Nasdaq Composite making new all time high yesterday.

Take his latest favourite, Twitter, as an example. He has been having fun riding it down 3 times over the past few years. Simple technical is enough to engage the stock with great risk reward control. He told me trading like this feels like taking money from the kids. Well, I am very sure most of the stock holders of Twitter are much younger than he is.

He has no plan to stop trading.

“Stop? No way!” is his reply when I asked if he is going to take it easy.

Now that he knows I will take care of the account for him if anything happens, he has the peace of mind to continue trading the way he likes it.

Once a trader, always a trader.

Longevity of a Trading Career

My mentor is a great example how a professional trader can keep on trading by switching to different markets to fit his lifestyle.

The key to long term success in a trading career often lies in the fact that the trader has a pretty flexible mindset and willingness to adapt to a different environment with fresh new perspectives.

Take my mentor as an example. When he first switch to trade stock he did not know what he wanted to do. He tested out various ideas with very small size until he found out what he is most comfortable with. The theme he chose to trade enables him to have the necessary conviction and focus. It serves him well for sure over the past 15 years.

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