What I’m Trading: Bill

Occupation: Trader (on gardening leave and trading up a storm!) 

Industry: Finance  

Age: Wrong side of 40

Location: Sydney

Stake Portfolio Size: >US$1m

Define your trading style.

Strong technical understanding of products and global markets.

I started my career doing the graveyard shift at Deutsche Bank trading the US markets. They were amazing times. There were some very big traders in the market back then, unlike now where everything is tightly risk managed and banks are heavily constrained under post-GFC regulations. I’ve always traded derivatives so I naturally look at the markets from that perspective to help me form a view.

Matt (Stake CEO) is a good mate of mine, a gym buddy and near neighbour; and we worked very closely together at Optiver. So we pick each other’s brains from time to time. His ways of looking at the market have definitely impacted my trading.

Why are you in the market?

Working for a bank or trading firm usually comes with restrictions on trading. Now I am on gardening leave, I am unrestricted (for a whole year while I sit out my non-compete clause).  These restrictions while working prevented me from trading any derivatives essentially and if I wanted to buy stocks, I would have to hold for a minimum of 6 weeks. Not much fun in that.

I trade to express a view and risk appetite to put my capital to work. I am loathed to leave any money sitting in the bank earning a near zero rate of return. Even if rates were higher I would still be investing. It is part of what I enjoy doing.

I’ve been able to make a great living and also meet amazing people along the journey. All while challenging myself and learning every day.

Being in the market keeps me informed and is exciting. 

What do you do in your spare time?

I love family time.  I spend heaps of time with my wife, two boys and very playful dog, Louie. I enjoy breakfast out every day without fail, reading the worker’s paper (The Telegraph) and doing Yoga which my wife has recently introduced me to.  Don’t judge until you’ve tried it.  I recently put a classic Jag back on the road after 30 years sitting idle. There is something beautiful and timeless about old school craftsmanship. I still get on the Judo mat occasionally to train with my boys, however, I am mindful of how I want my body to feel as I get older and regular beatings are not so grand.

The family and I travel a lot, especially to France. My son will start university there this year in September, so we will head over in June/July to get him set up. I’ll still be trading US markets so the timezone will be a little better.

What’s in your portfolio right now?

I trade a few stocks through Stake and also have my kids using it. I’m long a handful of tech stocks that I feel offer a new frontier for my investing. I am, of course, wary of many of their high valuations but I like their innovative ‘value add’ to a world that is full of mature, traditional, old-world stocks. That is the vanilla side to my trading. On top of that I love trading options.

How are your returns so far?

Solid. It’s been a good period with the market moving up.  I’ve focused a lot more on the US. I was investing time and money in Oz, but I’m really enjoying the US market – so deep and so many opportunities. Plus execution costs are so low (for shares and options) that it’s a bit of a no-brainer.

Any other investments that are not on Stake?

There are always a bunch of other things I am invested in. The cost of capital is so cheap now globally that you run the risk of eroding wealth if you are not invested.

I was selling options years ago when everyone else was telling me how bad and risky it was. Now selling short premia is a huge part of the industry. What’s old is new again. That’s how the world works.

I look for strong defensive stocks, lower implied volatilities and a history of solid earnings and sell downside puts on them. If I get exercised I am okay with that as I like the stocks and happy to own the shares. To that end I am short Visa & Microsoft Puts in the US. I also sell calls which is usually part of an overwrite strategy. I’ll do this if I ever get delivered on my short put position.

This month I’ve been a bit cheeky and stepped into Tesla, a stock I would normally avoid. The stock has rallied hard on the back of short covering, not fundamentals. It was one of the largest short sold stocks in the world. It has more than doubled in recent months and that to me is a strong signal. Implied volatility has spiked near 70% so I sold some upside calls at a very healthy premium. 

What are you watching and why?

I am expecting a pull back in the markets at some stage. It doesn’t have to be a massive correction. I just think some of these markets have gone too far too fast.  To that extent I would like to add to my Visa position and perhaps Mastercard.

I’m also interested to see how the Coronavirus plays out and the ongoing impact it will have on the markets. I could look to add to my Netease position or maybe even pick up some other Chinese related stocks that trade out of the US and are easily accessible through Stake.

Do you have a trading or investing role model?

I really wish I did but when I came through the industry I was part of the old school system that was less structured than the training new graduates receive today. I am self taught on all accounts. The most important thing I have learnt along the way is to identify my own risk appetite. You have to speculate to accumulate. There is no other way around it!

How did you first get in to trading?

I started trading before I even graduated from University. I started with stocks and quickly escalated to options. It was tough back then as there was no internet or easy access to prices like we have nowadays with platforms like Stake, so I used to call my broker literally every 10 minutes for a market update. No amount of commission could have made his life easy with me as a client. 

If you were to buy a US stock or ETF right now, what would you buy and why?

As I mentioned previously, I do like defensive stocks and I think we are not far off having to call on these qualities for what could be a short-term dip in the market. The problem is that many of them have also run hard in recent months. So perhaps I would think about an inverse ETF on an index? It’s not my usual style to pick markets but given I can get in and out easily, and I know my risk for such a trade, it might just cut the mustard.

ICYMI: make your own decisions

This is not investment advice, just my opinion. It doesn’t reflect any opinions of Stake. I’m as fresh to this as the next person off the street. Do your own research and make your own decisions.

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