Question

I was wondering if you could give me some advice on how to get an entry-level position trading options. I would like to learn the job from a professional. I currently trade on my own and have a basic understanding of equity options and some more advanced strategies from reading various trade journals. Where might one apply for a position like this? I have a B.S. degree in accounting. I’m not an “Ivy Leaguer” and I’m having trouble getting into a training program at the institutional level. I have a strong desire to make this my profession. I live in the Northeast but would be willing to move. Any ideas would be greatly appreciated.

Answer

I was in a similar situation 20 years ago. I was completing my MBA in Wisconsin when a Market Maker friend of mine invited me down to the CBOE. I had been trading options successfully and I had read anything I could get my hands on. Once I stepped on the trading floor I knew this was my calling. My friend gave me some advice that still rings true. He told me to swallow my pride and to ride the elevators all day long if need be. He said that getting my foot in the door would be difficult and that I would have to demonstrate my desire. I rode the elevators for weeks on end and submitted applications with any firm that had a sign on the door. Finally, I got a phone call. I accepted a job as a runner on the CBOT and I made $4.50 an hour. I also had to commute 4.5 hours a day from Milwaukee. I believe I was the most educated runner on the floor.

The harsh reality is that no one wants to teach you how to trade. The industry secrets are highly guarded. There are thousands of people who want to trade and the institutions have their “pick of the litter”. That is why the “Ivy League” statisticians get the jobs. If you could choose from any talent pool, why would you settle for less? Believe me; they pay their dues as well. A great education does not insure trading success. However, the trading group knows that a top graduate from a major university has drive and intelligence.

As for the rest of us stiffs, we have to work harder for less until we catch our break. Personally, I made the most of every opportunity and I networked continuously. My path took me through institutional and retail option execution. I was able to learn the business from a different perspective and because of my drive I was very successful. I never let my career stray too far from trading even though I was on the brokerage side of the business. In 2002 I took the biggest risk and started trading as a professional. I traded my own capital and I traded for a hedge fund. That was a contact I had made in the business and they knew me personally.

20 years ago there were many entry-level positions. There were also many more market-making positions. Now, electronics and program trading have replaced many clerks and professionals. Traders with years of floor experience are looking for “off floor” positions. There are many proprietary trading firms that will provide you with some basic education and research tools. They require you to put up capital and the first money lost is yours. They enable you to leverage their capital, but that usually has some strings attached. If you trade and lose, they will still make money on the commissions you generate.

This is a very tough business to get into and promises are a dime a dozen. It is very cut-throat and no one cares about you – until you’re profitable. The washout rate is very high so you learn not to get too friendly with any of the new guys, 90% of them won’t be around after the first year. I think my friend 20 years ago nailed it. Pull out all the stops, swallow your pride and do anything it takes to make it. If this is what you really want to do with your life – prove it.

Just remember, they don’t care about you making money. They care about you making money for them. If you’re a good trader, you want to spend every waking minute doing it because there is not a higher paying job in the world. Why waste your time teaching someone else – especially when the person you mentor will be tempted to leave after they learn how to trade?

I wish I had more encouraging words, but I don’t. I worked my butt off to get where I am and I still work 70 hours a week – good thing I love what I do. I also ate a lot of crow along the way.

If anyone else can share how they got a foot in the door, please post your experience.

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