Whiz Kid II

Discussion in 'Trading' started by Babak, Sep 8, 2001.

  1. Babak


    Thought this article would be of interest. Future Market Wizard in the making?
    Allan Kroach had finally seen enough from his son Laurie. In his early teens, Laurie took a liking to the stock tables in newspapers. He would pore over the business news, read about what companies were up to and, once in a while, approach dad with a stock tip.

    "And I would ask him, 'Where did you find out about this company?' and he couldn't really answer me," Allan Kroach recalls. "But as we followed these things, most of the stocks he gave us did well. We never bought at the time or anything ... but he would come back and say, 'Remember that stock I mentioned a few months ago? It's up here now.' "

    There may be something to Laurie Kroach's method. The 19-year-old has just won his second national stock market contest for high school students in a row, largely because of a high-risk options strategy. After missing out on those years of stock tips, the father now wants part of the son's action.

    "I have given him access to one of my [trading] accounts to buy and sell options according to how he played markets in the contests," Allan Kroach says. And so far he's "ahead of the game."

    Last fall, Laurie Kroach led four of his classmates at Thornlea Secondary School in Thornhill, Ont., to victory in a stock market contest sponsored by Wilfrid Laurier University and the Toronto Stock Exchange. The team posted an 86.7% return over a 12-week period, while the TSE 300 composite index shed 15% during the same time. Call and put options on a number of high-tech companies, in particular Nortel Networks Corp., led the team to victory.

    For the second Laurier contest, which ran for 12 weeks from Feb. 19 to May 4, Laurie told his teachers he wanted to go it alone. "I didn't have to reason with anybody," says the high school student, who wants to study business in university, starting in the fall. "I was just going to do it for myself and didn't have to worry how anyone else would feel."

    He had another message for his teachers: "I told them I would win."

    Did he ever. In the 74-day test of investing smarts, he turned an imaginary $135,000 into $453,405 for a return of 235% -- tops among 458 teams from coast to coast. In the same period, the TSE 300 lost almost 25%.

    Options, again, were his investment of choice. Laurie executed 88 trades involving call and put options on five different companies: Research In Motion Ltd. (RIM/TSE), Ballard Power Systems Inc. (BLD/TSE), Celestica Inc. (CLS/TSE) and, to a lesser extent, Nortel Networks (NT/TSE) and JDS Uniphase Corp. (JDU/TSE). (Call options give you the right to buy a stock at a given price in the future; put options allow you to sell it at a given price.)

    Laurie did most of his damage early. He vaulted into first place on day three of the contest, with just over $200,000 in his portfolio, and never looked back.

    "It was nothing special," he says of his early success. His big winning moves were put options he purchased early in Ballard and RIM.

    He also had puts on Celestica, but later in the contest traded those in for calls. That paid off handsomely and helped him get past the $400,000 mark. "I made a lot of money off Celestica."

    Options work in a stock market contest because you have little time to build up a big portfolio. But it helps to buy into a roller coaster. "You need [companies] that are volatile, have a lot of volume, go up and down and fluctuate a lot in a day," Laurie says about options trading. "If you invest in a company like BCE Inc., it will only go up or down slowly, and there are not too many spikes. You would make money, but make it slowly, and in this contest you need the money fast."

    Listening to Laurie describe how he picks companies is like sitting through a calculus class. "I watch a lot of companies and look at the graphs. I do a lot with the moving averages, make plot lines and see what a stock is expected to do."

    He admits options are not for everyone. Discipline helps. "I have a point in my head that if it goes below that, I'm out. Take this money out and maybe invest it later, in a few days, weeks or so."

    This is what his father likes to hear.

    "I was worried in the beginning [about his options trading], and still am, but over the course of time he's also learned some lessons," Mr. Kroach says. "Like, he hasn't always won. He's lost as well on occasion and learned what he did wrong."

    That's why the father is allowing the son to invest some of his cash. "He's very excited about me winning twice," says Laurie. "But now he wants some of it for real."

    from The National Post (Canada) June 9th 2001
  2. Htrader

    Htrader Guest

    Sounds like this kid has quite a record. I'm always curious on how these "prodigies" actually do with real money. Every year some high school team wins the CNBC stock contest with an enormous return percentage, but we never hear from them again.

    My thoughts are that doing so well in a contest gives the kid an inflated sense of self-esteem and perhaps too much confidence, both of which are fatal in real-life trading. Of course, all this can be offset if you are a truly outstanding stock picker.
  3. tradex21


    Too bad the kid will never be able to trade for real with all the newer "rules" that certainly will come on the heels of "Pattern Day Trader rules".:( Surprised he hasn't been jailed already.
  4. Babak


    Htrader, I'm also curious to meet him. I might get the chance as he has most probably taken the scholarship mentioned and moved into my hometown. I'll post again if I do meet him.

    tradex, did you read the story? if you had you would realize that the new rules will not affect his trading since he trades options!

  5. tradex21


    Babak Don't take me literally! Futures are going to be great also(single stock)!:cool:
  6. Bob777


    A so called prodigy lived down the street from my mother-in-law. Years ago my wife use to babysit this kid.

    Anyway, here's an article called The Prodigy and the Playmate. It's about the start, rise and fall of a wallstreet whiz kid.


  7. Htrader

    Htrader Guest

    Bob, that is one AMAZING story you posted. I'm surprised at all the details that the article has. This guy must have told everything to the reporter for some reason. Well too bad for him, just goes to show that money by itself doesn't solve anything. Judging from the article, sounds like this guy was a rather good stock trader, but he blew it all.