How a Little-Known Hedge Fund Wizard Trades Bitcoin Back in 2019, I had the great pleasure of meeting Larry Benedict and then working with him for several years.
If the name doesn't ring a bell, I'm not too surprised.
Larry's what you might call a "trader's trader." Few in the mainstream know his name, because he simply doesn't aspire to be a market celebrity like Bill Ackman, Warren Buffett, or Ray Dalio. He's solely focused on his track record – the ultimate standard he holds himself to.
And in a word, it's impressive...
Over a 20-year streak of managing hundreds of millions of dollars, Larry never lost money. His hedge fund ranked on Barron's top 100 list multiple times. And he was featured in Hedge Fund Market Wizards – Jack Schwager's best-selling book that profiles Larry as one of the hedge fund greats alongside Dalio, Joel Greenblatt, and the like.
Even with all this success, Larry's not one for the limelight. He prefers to stick to what he knows best: short-term trading. That applies to the stock market... and brand-new markets like cryptocurrency.
As you'll see in today's exclusive interview, Larry has a way that even traders who have "mixed feelings about crypto" – as he himself does – can profit from bitcoin.
So read on to hear how a hedge fund market wizard trades one of the world's most volatile assets... and how his subscribers have benefited since he started.
How a Little-Known Hedge Fund Wizard Trades Bitcoin Michael Salvatore, Editor, TradeSmith Daily: Larry, it's great to catch up with you.
Some of the folks reading this may be seeing your name for the first time. So walk us through your background. You've had a long career in trading... Can you tell us about some of the experiences that shaped your success?
Larry Benedict, Founder, The Opportunistic Trader: Sure thing, Mike.
I've been in the markets since 1984 – so I'm actually hitting my 40-year anniversary this year.
I started in equity derivatives at the Chicago Board Options Exchange as a market maker. Later in 1989, I was hired as an options specialist at Spear, Leeds & Kellogg (SLK), the largest specialist trading firm in the world at the time.
I became a managing director at that firm, and then a partner. Then in 2000, SLK sold to Goldman Sachs, and I went on to launch my own money management firm.
These were formative experiences... I learned a lot, especially at SLK, about how to trade sustainably. The skills I picked up there helped my hedge fund go 20 years without a losing year.
Michael: What would you say is the most important thing you learned at SLK?
Larry: Without a doubt, risk management.
When I started out in the 1980s, my risk controls were poor. My drawdowns were too big for the capital I had. It's a common tendency among new traders, especially in the setting of a big trading floor. You want to make big money, fast. But it can be dangerous.
At SLK, what they let you lose on a trade was so tight. It completely changed the way I traded. I would stop swinging for the fences and instead bat single after single.
I learned that, if you wanted to stay in the game for a long time, you had to build up your P&L (profit and loss) with a slow grind. Once you have big profits from this slow and steady strategy, only then can you take bigger risks.
Michael: Put our readers in your shoes. How would this kind of strategy work in practice?
Larry: It'd go something like this... [Larry begins his trademark doodling to demonstrate his point.]
At the start of each month, I'd choose a goal based on how I'd been trading lately – whether it was $1,000 or $50,000. That was the profit target for the month.
Whenever I got to that number, only then could I risk half of those profits on an attractive "home run" style trade if it came about.
If it didn't work out, I'd only lose some of the money I'd made that month and I'd be back to batting singles. If I lost, I'd aggressively de-risk my strategy. This way, I never ate into my original capital and would almost always end a month in the green.
Michael: I understand lately you've been applying these classic hedge funds techniques to a brand-new asset class: crypto.
I remember us talking about bitcoin all the way back in 2020, and you were a total naysayer... but you were happy to hear others were making money.
What's your perspective on trading assets like Bitcoin compared to more traditional assets?
Larry: I have mixed feelings about crypto as an asset class.
Bitcoin and other cryptos lack the regulations and protections of more developed asset classes. It's not rare to hear about a crypto exchange being hacked or losing its customers' money through fraud.
Plus, to buy Bitcoin, you typically need to create a special wallet to store your coins. If you lose your passwords, you're sunk. And that's not even taking into account the extreme volatility Bitcoin has experienced since its inception.
Many people have made lots of money from Bitcoin... and I'm happy for them. But we can't forget the many others that have lost fortunes, especially during the crypto bear markets when it falls as much as 75 to 80%.
So that's why I'm not a big proponent of buying and holding crypto, even with how much it's run over the past decade or so.
Michael: Given those risks, have you ever invested in Bitcoin?
Larry: The risk profile just hasn't been something I'm comfortable with. I've never bought a single Bitcoin, and I haven't ever recommended it to my followers.
Instead, I waited for an opportunity to take advantage of Bitcoin's volatility where I could better manage the risks. It took years. But I've found a method to do it.
Michael: Well, say more... what did you find?
Larry: The short version is I've developed a strategy that enables us to have clearly defined risk parameters with Bitcoin. That's the most important thing.
But it can actually exceed the return of Bitcoin, too. Basically, it allows us to profit even more than we would by holding Bitcoin over the same time frame. And without ever actually holding any Bitcoin itself.
So you don't need a crypto wallet or exchange account. Instead, it all takes place in your standard, federally protected brokerage account.
I call it "Bitcoin streaming." We can use this streaming strategy to profit when Bitcoin goes up. And even if Bitcoin experiences another drastic plunge, we'll still be able to draw profits from its moves using this strategy.
My followers have had the chance to beat Bitcoin's returns by 6x, 9x, and even as much as 22x. That means potentially pulling in thousands of dollars in as little as a week – and sometimes much more.
Michael: That sounds incredible... Like you're taking advantage of all the upside in bitcoin but with far less risk of holding it through drawdowns.
I'll be sure to share more info with my readers. Thank you for joining me today, Larry.
Larry: Always a pleasure, Mike.
Michael here...
Larry recently recorded an in-depth strategy briefing all about his bitcoin streaming technique.
In it he covers the tickers he likes to trade, how the strategy helps control your risk, and everything you need to get started.
So if you're still reluctant to buy into the crypto world, then this is a great way to get exposure to Bitcoin's moves.
And even if you are a big fan of Bitcoin and Ethereum, this is a way to ramp up your profits without putting your positions at risk.
As we've covered here in TradeSmith Daily, crypto is in a new bull cycle. The trading opportunities over the next 12 months could be massive... with the next major leg up potentially days away.
So before that happens, go right here for the full details. To your health and wealth, 
Michael Salvatore
Editor, TradeSmith |
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