Insights from Wharton School’s Investment Management Club

Seth FreudbergGeneral Comments, Options Education, Seth Freudberg's Blogs, Trading Psychology3 Comments

I gave a talk  in Philadelphia on options strategies  to the Wharton School Investment Management Club last  Thursday.  My daughter  Halima, who is an undergraduate student at Bryn Mawr College in suburban Philadelphia,  sat in on the the talk as well. In addition to wanting to be a supportive daughter, she was my intern four summers ago,   backtesting  options  strategies  for  me,  so she actually had an understanding  of the content.  She is  minoring in education and   has a natural interest in learning and how students react to information.

Halima took it upon herself to take some notes of how she thought the material went over with the students to help me hone these presentations  for future college talks and last night she came over to the house  to  give me her impressions.

It was interesting.  While the students were watching my presentation,   Halima  was  watching the students  and she picked up on the points that seemed to leave the greatest impression on them.  It turns out that what made the greatest impact  were points that I was conveying with passion from my own personal experiences–points that  in many cases   were not  all that obvious from the surface material that I was presenting, but had more meaning because they were borne from  my  actual trading experience.

Here are the points that she thought hit home most with the participants :

— What separates the men from the boys (or the women from the girls!)  in options trading, is not so much the initiation of trades, but the skills that are developed over time in adjusting a trade at the right time, for the right reasons, with the right combination of options.

— Options spread trading for income is different from most other forms of trading, because we are starting out with no directional opinion about  the stock or index that we are trading  and then using our adjustments to  react to what the market has done.

— If options spread trading was so easy, everyone in the world would quit their job and become options spread traders.  It  takes experience and hard work to become proficient and consistently profitable.

–PLEASE don’t run out and start trading options right after this lecture. I can almost  guarantee you will lose money if you start trading options without going through a thorough and deliberate process of building up your knowledge, experience and skill set. There are dangers and nuances that you must be aware of before you expose real capital to options spread trading.

–The key to trading  options successfully  is getting your emotions under control.

— The experience of trading a $5,000  account does not at all prepare you for the experience of trading a $500,000 account.  The only way to gain the experience necessary to trade a large options account is to very  gradually build your capital level.  This builds your “risk tolerance muscle” the right way–very gradually.

Halima  felt  the largest impact point was in fact the one that was the most personal to me:  that I love options trading and I can’t believe that I found a job where I get paid for having fun everyday.

If the club members take one point away from my talk yesterday,  I hope that it is this:  no matter what career you choose, be determined to pick something that is truly fun to you.  If you do, you’ll stick with it, improve  and  your career  will become  a fulfilling part of your life–not a  necessary evil.

Seth  Freudberg

Director,    SMB    Options Training Program

3 Comments on “Insights from Wharton School’s Investment Management Club”

  1. I like this post because I have been struggling with something. How is it that many people (e.g., SMB Capital, StockTwits, etc.) can be traders for a living and yet most of the world around me thinks I’m nuts that I want to do this for a living? I love options and it seems like it’s too good to be true that I can generate income by studying setups and identifying the right entry points followed by risk management.

    I feel like everybody should be doing it and it’s a matter of time before the “options world” is saturated with others like us…seeking income. Is the part that I’m not grasping is that I love options and the prospects of its role in my future and others don’t love it? Is this a temporary “job arbitrage” opportunity?

    Your third bullet point helps to answers my question: ” It takes experience and hard work to become proficient and consistently profitable.”

    What a privilege to be able to love this world of options. Thank you for your videos and blog posts. They are helping to solidify my mental state as I work on controlling my emotions. For now, I remain fully employed until I can be consistently profitable coupled with disciplined habits.

  2. Matrix, what a great attitude and you are more than welcome. When I first started trading options, I used to get up early on weekend mornings to backtest “brilliant” options spread strategies that would occur to me over night (I’d wake up and jot them down and go back to sleep-seriously). In the light of day, some of the strategies ended up being pretty silly, but a few made it through the cold, hard facts of the marketplace historically and are serving me well today. My family thought (thinks?) I was nuts. But I just loved it. I’ve been bitten by the options bug. Sounds like you have, too. I think it’s a good idea to remain employed until you are consistently profitable as you suggest. Anytime, you want to run a situation past me, I enjoy helping traders out, so just shoot me an email at [email protected] and I’ll see if I can provide you with a perspective that would be helpful.

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