Bolling: The Benefits of Trading

While discussing the market's trials and tribulations with folks at a party this weekend, some interesting observations arose.

One guy who is in fixed income seemed to be the most talkative. Although he has always made a good living, his phone seldom rang, even in a very busy major brokerage office. It was the equities guys rocking and rolling for years.

Now as equities have become shaky investments, his fixed-income desk is in big demand. Fixed income represents safety and a hint of return, he said. We laughed at the rates seen in Treasuries, the fed funds rates and inflation. And we chatted a bit about the relationship between inflation and fixed-income returns.

Another guy spent his days in structured products. He told me that they were busy creating products -- anything that would pull people out of cash. He mentioned a bizarre structured product called a Barrier Note. It appears to be a structured investment that plays out like this:

If the S&P 500 rises or falls 17%, you get your principle back only. If it stays within the 17% up-or-down envelope for 12 months, you get the principle plus 10%.

I laughed out loud when he told me the deal. I told him it resembles a casino bet. He tells me people are in cash big time so they are busy creating these "structured products" to lure the "trader" out of the investor. Just wild!

Another pal is a compliance attorney at Citigroup (C Quote - Cramer on C - Stock Picks). He is very worried that Wall Street layoffs will affect him. In the best case, his department will be lightened, making his day much harder and longer. In the worst case, he will be looking for a new place to hang his hat.

I told him that compliance was the last place to expect layoffs. Maybe Citi should move people off the trading desks and the mortgage-backed securities desk and place them in compliance. Perhaps Citi and the rest should have done that years ago.

And then there was me, the trader, the guy who has spent a career trading my own account. For 23 years, I have traded energy, metals and grains. I have traded equities, options on equities, options on derivatives and swaps.

I feel very fortunate to have this diverse trading background, and that I never have to wonder if the phone is going to ring and get offered a structured product created to lure a client out of his cash position and into my wacky bet on volatility. And I feel extremely fortunate that I don't have to worry about a boss calling me into his office to fire me.

I am lucky to have spent a career trading so that I can find the busy market and trade it. I can trade from my office, my beach house and even my car. I don't have to be in Manhattan to work.

I can trade from Miami, Spain or wherever the phone and Internet work. It is a gift given to me and I appreciate it every day. I respect it and that keeps me a viable trader.

That is the reason it is so important to be able to trade. Look, I am no smarter than most of you readers. I just made the decision to learn how to trade and just do it.

Sure there are bumps in the road and the trading landscape changes daily. But with diligent homework, a desire to make it work and a definitive fear of losing, almost anyone can make a career out of trading -- anyone with the discipline to cut a losing trade that is.

Speaking of discipline, I am adding a small amount to a long position I established in Devon(DVN Quote - Cramer on DVN - Stock Picks), Chesapeake(CHK Quote - Cramer on CHK - Stock Picks) and XTO Energy(XTO Quote - Cramer on XTO - Stock Picks). I established these early last week as the oil price continued its dramatic drop.

I have been calling for the oil price correction for months in this column, and by no means do I think oil has bottomed. I am looking at these three as intermediate- term buys.

I love the way these three aggressively buy oil-producing acres in areas that hold promise for massive oil and gas reserves. Aubrey McClendon has brought CHK from a small local gas player to a $26 billion indie player in a few short years.

He has done it through acquisition of producing wells and promising acres during price corrections. And DVN is a $41 billion independent oil and gas player with a similar history.

All three are relatively inexpensive with P/E's between 9 and 11.5. I do think oil can sit below $100 for a while as it continues its corrective slide, but gas is getting cheap trading with a $7 handle. Three good companies, relatively inexpensive; I am adding a small amount to my already conservative position because if they start trading below recent lows, I will stop my whole position out. Remember, one of my favorite trading quotes is "live to trade another day."

That is second only to: Trade with your head not over it.