I'm a recent graduate and trying to figure out how to become a successful trader/investor. I am looking for some career and trading advice, as well as making new connections if anyone is open. My background is in fundamental value stock picking, however I've started to move more into longer-term options trading. I manage a really small account (less than $10,000), so this is all really just for educational purposes. Most of my option trades have been pretty successful (anywhere from 90% - 294% returns), but I've also had my share of mega losses as well, mostly stemming from really concentrated long exposures in highly risky companies (they have been great lessons in position sizing). For options, I find attractive risk/reward situations on a fundamental basis, and then go long the options where the IV does not reflect my view of the fair value of the stock. Career-wise I have been less successful. I've applied to most investment banks and value-oriented hedge funds, but have been unsuccessful in getting even a first round interview. I understand that "high finance" usually hires elite kids from ivy league schools, so that's probably why. What do people think about First New York Securities as a starting point? I reached out to a PM there who told me it's really entrepreneurial. Is it a good place to learn, or will I be thrown in the deep end on day 1?
Not sure what you mean by that. Implied vol is not directional and does not point to fair value, it is a measure of uncertainty. But, if it works for you, that is great. True prop firms, a prop firm that hires you as an employee and does not take your capital, are generally looking for one of two candidates out of college; Top of the class IVY or near IVY quality grads with a background in math, programming or other similar disciplines, that they can train or someone with a verifiable track record and strategy that they can allocate to and mentor. If you don't have either, it is a long shot. You should have looked to intern at one during the summers when you were still in school. I don't know much about First NY, but firms like Susquehanna International Group (SIG) are very aggressive with college age students and VERY competitive. This is how the best firms hire. http://sig.com/campus-programs/ Bob
I remember one SIG incoming group had a college dropout and one guy who never went to college but this was before the whole electronic automation
I entered the CBOT out of college, thought I knew everything. The more time you spend with charts and markets/screen time. Your brain will start looking at things differently as time passes. You will look at things in a new light. Your trader brain is still undeveloped. You need a minimum of 5-10 years, to understand yourself and your actions in the market. Your gut will tell you if it's a good trade or not and when to abandon a trade before major losses ensue. Ultimately you end up evolving into a pure mathematical trader, using some discretion as needed.
SIG hired one guy in my trading crowd back in the late 90's, that did not graduate, but he was an excellent poker player. They taught him how to trade and he taught poker and card play to the traders. If you look at their website, they still teach poker because of him.
'Wall Street' is pretty much an old boys' elite club. -- if you come from an average state college, with just an average resume...you can pretty much forget it. You should just settle for more 'normal' finance jobs, whatever that may mean -- not the big ticket/big money positions at the big firms. College teaches you theoretical nonsense...it won't teach you how to actually become a successful trader. If you want to become a successful trader, that's something that you're going to have to find deep within yourself.
Thanks for your thoughts. Right, IV isn't directional, I explained that incorrectly - I guess I meant that I target stocks that the market is underestimating the future volatility due to fundamental reasons.
This is an interesting insight, thank you. So over time you've developed the ability to recognize certain patterns? And mathematically you assign different outcomes with probabilities, or is it more advanced than that?
I can only help you with Futures but I also went into trading straight out of university as a graduate. I have zero regrets about it. Look up a few of my posts as other people have also went down your same path. You need to read; 1. One Good Trade (this is especially true for Stock Firms) And you definitely need to get into a Prop firm that is going to allow an environment that allows learning and sharing of information. A lot of people are just f@ggots and enjoy jerking themselves off with whisper conversations behind closed curtains (and they probably jerk it together too). Avoid people who are secretive and give washy answers. One Good Trade should probably be read like 2-3 times as you will understand much more the second time you come across it. There are a lot of sharks in this industry but if you can get people to show you their Lifetime PNL (I posted mine here before) or even monthly results in the account sheet, you know you're in some good hands as a start. Good luck
Understanding future volatility of a stock based on it's assumed current underestimation? Wow, that is indeed some wizardry! Bravo. If you have your rationale coded in math models I'm sure GS would be happy to look into it just as any Quant House.