Halloween is upon us and with it comes trick or treating: the 4 hour laborious effort to collect $23 worth of candy from neighbors and strangers alike.
With multiple kids, I know protecting your candy horde from sticky fingered siblings is paramount. As a result, I’ve generously offered to stand as custodian and clearing agent for each child’s candy pile and I’m willing to facilitate trades for a nominal candy fee.
The Trade Lifecycle
Pre Trade
Pre trade involves all the steps involved prior to agreeing on a trade.
Product definition : “A Starburst candy equals 2 individually wrapped candies”
Price discovery : “How many Milky Ways is a Reese’s Peanut Butter cup worth?”
Counterparty risk evaluation : “Did he lick this before offering it for a trade?”
Legal and compliance : “Peanut allergies make all peanut butter products ineligible for consideration”
Once discovery and terms are negotiated, a trade can take place.
Trade Execution
Trade Execution is pulling the trigger and agreeing on a proposed structure for a trade. It’s at this point, “No take backs” becomes enforceable.
Trade Clearing
Clearing is the correct and timely transfer of funds to the seller and securities to the buyer.
Here’s where Dad steps in, for a small tasting fee of course.
I can kick back the trade as unfair if someone is clearly selling snake oil
Each child provides ME the candy and I deliver the candy to the other party
No one can eat the candy until both parties posses their candy
If one kid does not deliver the candy as agreed, the trade is null and void.
The Dad Tax is a similar axiom for managing food and beverage in our house.
Trade Settlement
Settlement ensures all the final elements of the trade are handled in a timely and appropriate manner.
Candy wrappers are thrown away
Hands are washed after chocolate consumption
No child tries to snipe any extra candy
All parties walk away in agreement that trade was a success
Ongoing Position and Risk Management
Re -evaluate your candy horde
Check if anything is melting or broken
Reconcile the count of candies to ensure the balance aligns post-trade
I would greatly recommend The Trade Lifecycle: Behind the Scenes of the Trading Process for anyone who is in back office roles or just wants to get a strong understanding of the mechanics behind the flashy charts and PnL
Follow these steps and you too can have a happy and calm November with only minimal fighting, crying, and sugar crashes.
TRADERDADS MAILBAG
Thoughts? Questions? Comments?
Reach out! Maybe I’ll do a full post on the topic or as a Q&A
traderdads@substack.com
