ALL IN

I wrote yesterday about the fact that I need to do something with my spare time and one of the ideal things I can do as a trader is to learn how to play Poker. I have been making an attempt to learn the rules of Texas Holdem Poker and have been fairly successful in playing the Zynga Poker games online in Facebook. Given the similarities in the skills required to be a good Poker player and a good trader, playing Poker online is a nice way to pass the time as well as sharpen my skills as a trader.

One of the skills required in Poker is to learn what is the state of the game on the table. Are players playing tight or loose. Are players aggressively betting with mediocre hands or only playing good ones. The amount one bets and the hands one will play will change depending on the state of the game, ones position on the table and the amount of money or stack one has.

But today, I want to talk about one play that one is inevitably faced with. Specially as one gets short stacked (one has very little money left in comparison with a lot of other players), there comes a time when the best option left to a player is to go ALL IN even with a mediocre or bad hand. Failure to do so would any way lead to inevitable bleeding of chips and loss of all the money. By going ALL IN, on a hand of his choosing, the player at least retains some chance of winning and altering his stack size, thus coming back into the match. Not doing anything is not an option because the small blinds and big blinds will inevitably bleed him dry.

A similar situation was found in the Mumbai Indians vs Chennai Super Kings Champions League T20 match. When Malinga (a bowler) came into bat, Mumbai Indians still needed some 50 odd to win in 4 overs. Malinga swung for the fences, connected almost all of them and won the game for his team.

You might wonder what is it I am talking about in this note on Poker and Cricket. If you notice both of them refer to a situation where the best play for a player is to go for broke. The alternative is certain defeat. In such a situation where the choice is between certain defeat and aggressive display of strength it is clear that it is best to go out all guns blazing.

That, I think, is precisely the reason why the market has refused to see a collapse of the type seen in 2008. For long only funds it is best to remain long or even invest more money at this time in a ALL IN kind of gamble on the ECB and European politicians. No point in trying to factor in or play for a situation where the world slips into a recession or a depression. If that happens then in any case everything is lost, so the best play is to swing for the fences or to go ALL IN.

However, I am a trader and my plays are more short term in nature. On top of it, I can go short and therefore make money in a falling market too. I am also mandated to make absolute returns and not benchmarked to any index. Given all this, the best play for me is certainly not a ALL IN kind of aggressive bet on the world politicians. I remain short on the market and will cut my short and go flat if Nifty futures crosses 4936. Given the fact that S&P has closed strongly and that Asia is up, my levels could get hit today.

As an aside, it is completely alright for a Poker player to go ALL IN, for a cricketer to swing for the fences when everything is lost and for funds to gamble everything. It is another matter altogether if Governments across countries bring the world to a state where going ALL IN is the only sane option!