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How Can I Get An Entry Level Position Where I Can Learn How To Trade?

Posted by Pete Stolcers on September 15, 2010

Option Trading 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.

Option Trading 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.

Option Trading Comments

  • On 06/16, Ty Broussard said:

    Thank you for the honesty and I’ve not ever thought it would be different than in how you laid out the realities of ‘getting an entry level position! Nevertheless at age 63 and retired I never lose sight of a dream to one day trade alongsideothers who ‘possibly’, and I say again, ‘possibly’, love trading with the fierce passion and desire to succeed as I do. It would be FRESH AIR INDEED!! Ty Broussard

  • On 10/18, Lance said:

    Well, how about someone in their early 50’s who wants to go back to school and get an MBA and learn the business?

  • On 10/18, Pete Stolcers said:

    Lance,

    An MBA will teach you economics, corporate finance, portfolio theory, statictics…
    These subjects are critical to investment analysis.

    Weather you get a job as a trader or you manage your own portfolio, you will benefit from the program. As I mentioned above, you won’t blow anyone away with that degree and it will be tough to get your start in trading.

    Everyone hears about $100 million dollar hedge fund salaries and they decide they want in. The competition is STIFF.

    Good luck with you studies and congradulations on the commitment.

  • On 10/22, John Roan said:

    I am ready to eat crow.  I have no degree no knowlegdge but very hungry.  I will keep you posted on my success.

  • On 12/18, Ty Broussard said:

    I’m still here and still trading every day and I don’t miss an opening though to the close!  I may ‘not’ trade that day, as I am fully aware that managing $$ is the #1 rule that keeps us all in the game and some days it will be too painful to risk losing any of my trading acct $$ just because I got up at 4:30 a.m. to be ready for the open of the mkts and I’m in front of my computer. Thats “why “ I get up at 4:30 a.m.. I may see something develop like a momentum trade or a chart formation or poss a “put option oppurtunity” I can close quickly because of the volatility. Equity stocks may present the same situation.

    But I still toil with low trading $$ in my acct and it never seems to get beyond a certain amount as experienced as I am.  It takes $$ to make $$!!!

    But its worth it all to me, and eventually a break will come.  I’m older and hope “good” enough to make a living and I will be a little happy, but cutting a swath through the ranks and succeeding beyond what anyone else thought I could do is my greatest desire! Don’t give up as you are one trade away from it all!

    Ty Broussard 12-18-2007

  • On 12/18, Pete Stolcers said:

    Hi Ty,

    Keep on pushing. Managing losses is the key. I find that 80% of my time is spent adjusting risk and trying to position myself for a move. About 20% of the time I am in the right place at the right time and that is when I make the lion’s share of my money. 

    Happy Holidays!

  • On 12/18, Ty Broussard said:

    Pete,

    Thanks for the encouragement and the teaching!  Its been very valuable to me to read from your site and your own recommendations keep me from your newsletter as a real source for my trading. I rarely get near $30,000 in my acct to trade with and you stated that amount was only reasonable for affording the subscription, along with fees, brokers etc. Thanks again!

    Regards, Ty Broussard

  • On 10/31, peter apice said:

    married put?
    hi pete i am learning from a web site that teach you to manage risk with a married put as well as money management also shows how to recover your money you paid for the put is this a smart way to trade thanks peter apice

  • On 11/01, Pete Stolcers said:

    There is a season for all strategies. Right now married puts are not a good strategy. The market is down 30% in the last month, and your put protection is costing you a fortune because the implied volatilities are at all-time highs.

    Married puts with “a way to pay for the protection” are known as collars. You sell a call and use the proceeds to finance the put. I do not like this strategy.

    If you are going to hedge all of your risk away and strip away your upside - what’s the point. Be very careful of gurus teaching this strategy. It sounds great to the novice.

    Do your research up front and take a stand. If you are wrong, get out. That is directional trading and it’s what I do. Be flexible and don’t look for a one-size-fits-all strategy.

  • On 11/13, Jordan said:

    What are your thoughts on the Think or Swim teachings.  Theta decay trades / neutral trading etc.?  Obviously this has been a tough way to go these days but so has directional trading, except if you pick the top and bottom of every stinkin move! Would you promote a blend of both strategies...positive theta, with directional bias based on conviction?

  • On 11/14, Pete Stolcers said:

    I am a directional trader and that is the best approach. I discuss the flaws of non-directional in many of my blogs.

    Brokers love non-directional trading - lots of commissions and extended periods of success before the big hurt comes.

  • On 11/27, respectfully said:

    This article will be kept to share with all youngsters as a generic indicator of what lies ahead, without regard to their area of interest. Hopefully, a few may run with it for a better life direction. Your “Ivy League” reference is especially helpful. Thank you.

  • On 12/03, RON JORDAN said:

    I am a retired blue collar guy with about 100,000. in an schwab account. I wouldlike to increasemy income with little risk. I own spy etf and I plan to keep this as a long position for the forseeable future. I have been selling covered calls and have been happy with the income. My question is this: it seems my only downside risk is the possible erosion of my etf. I’m vulnerable to this risk any way as I want to keep this long position, am I ok with this strategy in my retirement. I also own 80,000. in a gnma fund for safty in case of meltdown. tksb single11

  • On 12/31, Moumita said:

    Your article is really nice. I personally believe that if I enjoy my work then nothing will be able to bore me and I can keep working as long as I wish. For me this is the basic point to step on the floor and to be successful.

  • On 12/31, Pete Stolcers said:

    Do what you love and you will never work a day in your life!

  • On 06/20, Paul said:

    Hi, I have not yet traded options, but am practicing and learning a lot.

    I have 3 simple questions that has baffled me....

    1. If I am trading with an online brokerage company and I make a profit, whose money do I actually get paid? Where is the money coming from? Is it the online broker company, or do they just make the commissions? Is it from the market maker? Sorry if my question seems ignorant, but I have yet to grasp this concept.

    2. If someone is highly successful at trading options, and makes hundreds of thousands of dollars, can that person be shut down by whoever is losing the money, or can they continue to trade without any problem?

    3.  The online company I have been practising with has a maximum limit of 1,000 contracts for option trades. Is this the same with all such companies, or is it possible for someone to trade larger numbers of contracts? If so, which companies?

    Thanks for your help.

  • On 06/22, Pete Stolcers said:

    1. The OCC (Options Clearing Corp) backs each trade and the other side is forced to make good on the trade. They have to put up the money (or margin) in advance of the trade so there is not chance for default. The brokerage firm on the other side is required to collect these funds and the OCC makes sure they comply.

    2. No one can shut you down because you are making money.

    3. You are way ahead of the game. Walk before you run. There is no need to worry about trading 1000 lots. Consistently make money trading MUCH smaller size over a period of years and then you can start worrying about position limits. If this was so easy, every other person you would meet at a cocktail party would be an options trader. Trust me, this is a tough business.

  • On 09/15, Kenrun said:

    I read your reader’s question and your response about becoming an options trader.

    I can offer this:
    First the good news: I love to trade but never wanted to be a floor trader. With commission fees as small as they are and software as good and cheap as it is (all you really need is some up to date charts and every broker offers that for free) there is no need to trade for anyone other than yourself. And the advantage is that as a personal trader you don’t have to trade every day. Only when the cards are in your favor. If you feel you need to be a floor trader so you can be the “first in” then you are already doomed. If you think you want to be a floor trader to “learn” I don’t think competitors are apt to tell others how to beat them at their own game.

    I have traded stocks on my own starting with $100K in an IRA account. Got it to $350K in three years and then traded options. I built that up to $1.8M, all in about 2 years time, all while still holding a full time job.

    Now the bad news, beleive it or not, I lost it all in less than 2 months time. You can be right even for years, but the times you are wrong can be devastating.

    The moral of my story is that I both earned and lost on my own just fine and so can you. There is no need to have to “learn” or need to be on the floor to make your money. In fact once I understood that they and not you have to always have a bid and and ask, I had a lot of fun finding great oportunities to pick up and dump a large amount of options fast by going only a tick or two past the bid and ask. Can be very profitable.

    Simply watch stocks and options all day long on your own and you will learn all you need to know. Next, don’t ever after a loss, try to make it back in a rush. I was disciplined for years and in 8 weeks time lost all sense of reality in trying to do just that and wound up doing things I never would have done 8 weeks earlier. Although I have no money to trade I still watch the market closely, still have my job and my home, and my health, so I cannot say I regret trading, just regret losing my discipline. Would have happend the same way on the floor.

    Hope this helps, best of ...no not luck, but disciline and not when you are winning, but when the market moves fast and against you.

  • On 10/14, Quentin said:

    Wow, great article Pete ! I agree 100%. Very hard way to make a living, BUT like anything else in life you reap what you sow. Start small and dont get discouraged when you take losses. Just keep them small. Keep learning all that you can about trading and keep coming back to this website. Pete has done a great job on trying to educate the average Joe to help them learn to be a good option/stock trader.

  • On 07/20, Marvin T. said:

    I have taught myself how to trade options in the past few years but I just have the issue of capital. I’ve had some success but I’m wondering if there is some way to get more capital. I have a simple job now, but it can take a while to save up. In losing money I found a better, cheaper way to make profits but I’m just lacking the capital right now. I’ve found my own unique way to make consistent profits, but is there any way to convince an angel investor?

  • On 07/21, Pete Stolcers said:

    The harsh reality is that there are not any “angel investors”. People want actual trades, a track record and a knowledge of the system (risk/reward). Paper trading and hypothetical systems won’t do.

    I would not suggest borrowing the money from friends or relatives. Scared money never wins and you will be sweating out every trade.

    Save your own money and trade small size with your own account. As your success builds, gradually ramp up.

    Good luck.

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