Planning My Next Meetup [hopefully not MIS] Adventure (Part 3)

Following my e-mail posted last time, Meetup responded:

     > Hi there, sounds like a great potential group! Many groups
     > cover metro areas, and not just a single city. Meetups should
     > be offline and in real life. but online meetings are okay as
     > long as they’re not the majority of the group’s events.

I was really describing multiple metropolitan areas (Ann Arbor, Detroit, and Lansing).

     > Perhaps you could have a Slack group for your online
     > correspondence and use Meetup to access our community
     > and gain new members, and plan in-person events?

I replied:

     > Thanks for your input.
     >
     > From what you describe, though, would this be acceptable for
     > Meetup? The purpose of this group is to learn and/or help each
     > other with their trading by working together on trades. Trading
     > really lends itself to screen sharing, screenshots, and other
     > things that can be posted on something like Slack, Yahoo! Groups,
     > etc. Most of our regular work would therefore be online. The
     > Meetups would perhaps be quarterly to allow us the chance to
     > visit in-person those people with whom we work every day. My
     > hope is that Meetup can bring us together in the first place.

Meetup replied:

     > While we’re not able to offer specific advice or coaching on
     > creating on your group, we recommend closely reviewing our
     > Meetup Group Policies to ensure when you create your group it
     > adheres to… [our] guidelines…
     >
     > Once you submit your new group, a member of the Community
     > Experience team will review the group for approval.

I felt like we were once again miscommunicating as described in the first paragraph of the excerpt here. Their initial response (second paragraph, above) clearly expressed a conflict, but they seemed to be encouraging me to go forward regardless.

I responded:

     > I’m not looking for advice or coaching. I’m trying to figure out
     > if my group meets your guidelines. You wrote, “perhaps…
     > [use]… a Slack group for your online correspondence and use
     > Meetup to access our community… gain new members, and plan
     > in-person events?” That is exactly what I would like to do.
     > However, the previous paragraph says “online meetings…
     > [cannot be] the majority of the group’s events.” That is
     > problematic since the group would mainly be a daily online
     > work group. Occasional in-person events would also give us
     > the opportunity to meet face-to-face people with whom we
     > have been doing daily work.
     >
     > I’ve been attending Meetups for over 10 years and I see
     > Meetup as the perfect tool for this. I looked at your
     > Standards document, though, and saw: “Be Local. Meetup
     > is intended for building local community. Meetup should
     > not be used primarily for scheduling online meetings,
     > conference calls, or WEBINARS ACROSS GEOGRAPHIES…
     > Meetup’s features should be used to build the group’s
     > capacity and create opportunities for meaningful connections
     > within a local community.” [emphasis mine]
     >
     > That also suggests this would not be a viable Meetup. As
     > mentioned in my initial inquiry, I feel the need to cast a
     > wider geographic net to find the few people who would really
     > be interested/benefit from a group like this.

Meetup replied:

     > The focus of a Meetup group would be in person interactions,
     > and at least 50% of the interactions should be local and
     > face to face.

Finally, a resolution! Meetup is not a direct solution for the kind of blended (online and face-to-face) group I wish to create.

Planning My Next Meetup [hopefully not MIS] Adventure (Part 2)

I previously discussed a potential Meetup model where members with sufficient expertise to present [advanced material] about option trading would have meeting/membership fees waived.

That concept, along with the rest of my thoughts from the last post, have gotten me thinking about trying to organize again. To that end, it might help to review my last attempt and why it was rejected.

I recently contacted the folks from Meetup online. I wrote the following:

     > I’ve had some fits and starts with Meetup in the past so I
     > want to go over my idea and see if it would be appropriate
     > per your community guidelines.
     >
     > I want to network with serious options traders (or those
     > interested to learn who would be serious about committing
     > time to work together) to create a trading team where we
     > consistently study simulated trades.
     >
     > This sort of community is badly needed. Independent traders
     > like myself operate in a very isolated landscape often preyed
     > upon by vendors of various types looking to profit under the
     > guise of trying to help and support us.
     >
     > Independent traders are uncommon (most with investible assets
     > hire professionals to manage their money). Option traders are
     > a fraction of the fraction, which makes them even harder to
     > find. I might have success in a big city like New York or
     > Chicago where the trading exchanges are. In Ann Arbor, Detroit,
     > or Lansing, though, I have found it to be really tough sledding.
     >
     > The group I envision will do most of its work online through
     > something like Yahoo! Groups, Slack, or GoToMeeting. I hope
     > to have daily online activity with trade monitoring and
     > creation. Disciplined, consistent participation establishes
     > accountability necessary to become a good trader.
     >
     > I would like to have a periodic in-person meeting to
     > actually see and shake hands with the people we’ve been
     > working with so regularly. This is where the traditional
     > Meetup comes into play.
     >
     > Initially, I would open the group online. I would then
     > like to interview each member to assess whether they are
     > serious and have something to offer. I want people to
     > either have expertise or time (which will eventually
     > result in expertise) they can commit to studying trades.
     >
     > If I can find 3-10 people then I will create a virtual
     > meeting of some sort to get us started. I would have
     > them pay a small fee (maybe around $50) to cover Meetup
     > expenses and/or anything else (including renting space
     > for periodic physical Meetups down the road).
     >
     > Finally, I would like to focus this on the Ann Arbor,
     > Lansing, and Metro Detroit area. This is bigger than a
     > city: [as discussed above] I feel the need to cast a wider
     > geographic net to have a real chance of finding interested
     > parties. It’s all within a 90-minute driving range, though,
     > which is hopefully not too large for members even at the
     > extremes to make a quarterly or semi-annual
     > face-to-face get-together.
     >
     > Any feedback would be appreciated!

I will continue with their response next time.

Planning My Next Meetup [hopefully not MIS] Adventure (Part 1)

Today I am “jotting down” some other related ideas to this blog mini-series I wrote last year.

Flashing back to the end of last year, I was aware that coming into 2018, I had some New Year’s resolutions that I aimed to fulfill. I was not happy with the progress.

With regard to work, my hope was to “get more involved” in 2018. I was thankful to have survived into my eleventh year trading full-time for a living, but I missed my pharmacy co-workers and patients (see fourth paragraph here). I had searched high and low for other full-time retail option traders but had yet to make lasting connections for a variety of reasons.

One way to become more involved would be to organize a group. As already described (in addition to link from the first paragraph, see here, here, and here), previous groups [planning] failed to bear fruit.

A different kind of group would be an educational experience for high schoolers (see third paragraph here). To this end, I reached out… but I will save this discussion for a separate post.

Here are some things that I know:

• Trading for a living is held in high esteem and described by some as the Holy Grail (e.g. trading from the beach to pay the bills without a worry in the world).
• I have searched high and low for other full-time traders with little success (e.g. fourth paragraph here).
• One trading guru opined: “people like to be spoon-fed strategies or trades. Better yet, just drop bags of cash in their lap as they sit on the couch watching TV.”
• Beginners in trading group attendance are often hoping to get free knowledge that will pay dividends.
• Most members of trading groups and forums lurk quietly without participating.

With regard to the latter, I think people who share advanced knowledge should be admitted to the group at no or minimal cost. Such a trading community currently exists. They broadcast weekly trade webinars. Anyone can attend for free, and for a monthly fee I am able to view any webinar in their entire collection on demand. If I present at one of their weekly meetings, then I get membership free for one year.

I like this model because while I believe everyone should contribute (i.e. second paragraph here), I do not wish to discriminate against beginners who are not yet able. Monetary contributions are different from sharing expertise, but they become quite important if you believe the organizer should (at least*) be partially reimbursed for expenses. Done this way, experts’ costs are covered by beginners in exchange for a sharing of experience.

I will continue next time.

* The extent to which I should be compensated as an organizer is an enticing topic for
   an entirely separate blog mini-series. As discussed in the second paragraph of the
   excerpt here, fees are as much for accountability as anything else. Honestly, if I knew
   the next group I create would be long-lasting and hit my objectives, then I would
   happily pay for it myself because my resultant trading profits would more than cover
   the expense (this is a potential marketing angle, too).

Money for Nothing?

Dire Straits! While I love the song, no longer do I think it characterizes premium trading groups that charge for attendance.

In June 2015, I was irked to see a new trading group for $15/meeting. I e-mailed the organizer to verify: “as in $780/year?”

“It costs $100 for a day of golf,” he replied. “This is a good value.”

Although I enjoy watching on TV, I have never been a golfer.

Charging for a group like this was something I truly despised about the financial industry. I viewed the category of self-directed traders as bifurcated between the traders themselves and the set of companies looking to profit off them. The latter sells mentoring, trader education, market software, coaching, etc.

I could accept raising funds to cover group expenses but I could not accept raising funds simply to pad pockets. I considered myself to be in the business of trading—not a business of the just mentioned that would involve marketing, sales, or advertising. As a group of equals, I figured what a trading group had to offer me was what it had to offer every member: new ideas to bolster trading income. Why should the organizer alone, then, profit from its formation and attendance?

One reason I have since had a change of heart is because this is not a group of equals. I have unsuccessfully searched for others with a full-time trading business (see here, here, and here). I have found many who say they want to learn. I have found some who describe themselves as [inconsistent and] “part-time.” I have found more stock traders who know nothing about options. If the group I form will not be a group of equals and they have more to gain from an informational exchange than I do, a per-session charge is justified as an investment for their future.

My second objection to free trading groups involves accountability. I blogged about this here but the seeds for this belief were planted much earlier. On July 19, 2015, I wrote:

     > I’ve said this recently but I strongly believe it takes a
     > lot of time and effort to make substantial money trading.
     > It takes constant, continuous commitment. I almost believe
     > one must approach trading as a business whether it actually
     > is or not. I think the time dedicated to learning and
     > practicing will ebb and flow and without a maximal
     > level of devotion, when that time ebbs much of what
     > was gained during the flow will be lost.

We hope that with experience comes wisdom. I have changed my tune with regard to investment advisers. I have changed my [Dire Straits’] tune with regard to premium trading groups as well.

Meeting with XC (Part 3)

Today I conclude with summarized notes from my meeting with financial adviser XC on August 22, 2017.

If I want to find people with a disproportionate equity concentration then XC suggested looking at Domino’s Pizza, headquartered locally, which has gone from $8 to $160 in recent years. Ford is another possibility (think of all the commuters going to Dearborn every day) along with DTE Energy and Consumers Energy.

XC is a believer in credentials: the more the better. Series 65 is the minimum requirement to manage money in Michigan but it’s given by FINRA, which is focused more on brokerages. He suggested looking into options/derivatives licenses as well.*

Hypothetically speaking, if he advised for one of my trading clients then I would be my own solo practitioner. He would not officially recommend me—doing so would put his company’s reputation at risk—but he would be interested in my performance. He would also be mindful of my fees. If I were generating a lot of short-term capital gains for a client with an annual capital gains budget then it might affect how he would manage their trading portion. The more fees I charge, the less the overall AUM, which would lower his compensation. This could be a potential conflict of interest.

If I were to pitch my trading strategy then XC said they would have to play devil’s advocate by addressing risk and liability exposure. I was not sure whether or not this was intended to be a hint.

XC recommends Schwab Advisor Services at >$5M AUM because of the useful tools they offer. At $25M AUM they pair you with a corporate relationship expert.

XC seemed like a sincerely nice person with a solid knowledge base. He was also generous with 100 minutes of his weekday time. If I start an IA then he said he would be interested to hear how I progress. If I need anything further then he invited me to call. He expressed interest in reading my blog and suggested again that I check out their website and available tools.

I took a few useful suggestions away from our meeting. I will make a LinkedIn profile. I will think more about putting together a presentation of my story and/or what I do. I will also look into whether any [insurance] companies might be looking for IAs to manage their cash position.

*–Series 3 is the National Commodities Future Examination and Series 4 is the Registered Options Principal Examination. I question the relevance of the former to trading options and I’m doubtful about the latter, which deals with supervising option traders and trading activity.

Meeting with XC (Part 2)

I continue today with summarized notes from my meeting with financial adviser XC on August 22, 2017.

XC managed assets for an insurance company that grew to over $200M AUM through some fortuitous M/A activity. His first personal clients were co-workers who liked what he did with corporate funds and asked him to manage their money. This was $25M in a single-shot that he credits more to luck than he does to investing skill.

XC introduced me to E/O (errors and omissions) insurance. One example of an E/O situation is where the IA goes to buy 25,000 stock shares of stock for a client and accidentally enters the wrong ticker symbol. The IA would be liable for any losses and E/O insurance would protect the firm. I did not get the chance to ask about cost.

He talked a lot about some of the free tools located on his company’s website, which allow clients to make future growth projections and to see how their overall financial situation is progressing. He suggested I check out these tools and encouraged entry of some personal information to see what it says about me.

After discussing these tools for a few minutes I pointed out that trading, not financial planning, is what I want to do. Even so, he argued, I should not aim to be a trader who has no personal relationship with clients. Talking about their total financial plan and where I fit in is a way to avoid such anonymity that could otherwise leave clients’ future satisfaction solely dependent on my trading performance [“everyone knows” no strategy works well in all markets]. XC said client turnover is very costly in this industry because expenses to the firm are front-loaded.

Getting back to the website, XC said they post a blog every 2-3 weeks of 1,000 words or less. They rarely post market commentary because he doesn’t want content to be time-limited. He said the blog is a really good way to get an idea of how/what someone thinks. The posting date (although it may be changed or the post deleted) adds context about current events surrounding a stated viewpoint.

He attributes a lot of his success to networking. Some of his jobs arose because of people he knew as far back as college.

XC talked about a gynecologist he knew who later went into finance. He was interested in trading but didn’t want to be the one doing the trading. Instead he did extensive research on a broad spectrum of wealth managers and became an encyclopedia of available offerings in the industry. Combining this with his knowledge of physicians’ backgrounds and needs, he was able to talk to clients and make (give) relevant recommendations (advice).

I will conclude next time.

Meeting with XC (Part 1)

On August 22, 2017, I met with a financial adviser to share my story, to learn about his, and to hear any ideas or suggestions he might have about transitioning my career toward the IA domain.

Although I have removed/changed his name (initials), I would feel comfortable recommending XC to anyone looking for a financial adviser. Please e-mail me if that might be you.

I was shocked to realize our meeting had lasted 100 minutes. XC was very generous with his weekday time.

As part of their service, XC’s firm trades securities for clients and he believes their edge is 25-50 basis points. For smaller net-worth clients they use ETFs. For larger net-worth individuals they use individual equities. They do a fair bit of covered call writing as a mechanism to defer capital gains taxes. On two occasions he mentioned an example where someone with a large equity position and low cost basis would trigger heavy capital gains upon sale.

I am very curious to know more about their trading edge. Does he believe in CCs as a mechanism for outperformance? Where did they procure their trading expertise? How were they trained? Do they make consistent efforts to improve? If so then how? I believe it’s important to remain focused on realistic returns but I would also recommend any self-directed investor to aim higher than 50 basis points.

XC believes the money management industry is a highly competitive space with a low barrier to entry. He estimates a start-up cost of $50K to start an IA—much higher than I would have guessed!—and significantly less on an ongoing, annual basis.

He thinks my best chance for success is to find people interested in my particular type of trading and/or what I offer. I asked if he thinks the average investor is educated enough to understand what I do and he said no: the average investor doesn’t really care much about how the IA generates returns. This struck me as contradictory: why try to find people interested in my type of trading if they can’t understand what I tell them?

XC recommended I subscribe to LinkedIn professional as a way to find others who share my niche expertise and interest. His preferred approach to networking is finding someone else who knows the target and asking that person to refer me.

He also suggested I speak with the Ross School of Business (daughter’s alma mater) to find others working on related [option trading] projects.

I will continue next time.

The SEMI Trading Collective

Greetings everyone!

In the time since our last contact, I have teamed up with a full-time retail option trader to organize this group. After lengthy discussion, we have decided to change our focus.

Welcome to the Southeastern Michigan (SEMI) Trading Collective. Our main goal is to promote financial literacy with a focus on trading and personal portfolio management.

We hope this group will be significantly different from other trading-related groups we have attended. Among other things, we welcome and encourage participation of men and women. We encourage and support presentation on different topics by different group members. We encourage networking and the formation of trading teams.

Here is a partial list of topics for discussion:

• Conventional investing approaches
• Traditional asset management and questions to ask financial advisers
• Two main types of trading
• Non-directional trading
• How statistics apply to trading
• Trading system development
• Backtesting and coding
• Brokerage platforms
• Psychological and practical considerations of trading as a business
• Option trading
• Day trading in the context of an overall trading approach
• Risk and position sizing
• The importance of critical thinking
• Realistic performance goals and expectations
• What to know about fraud and common techniques used to deceive
• Claims, advertising, and marketing in the financial space

The cost to be a member of this group will be $10 per year. We will also charge $10 per Meetup for those who attend.

If you make this group a priority, attend meetings consistently, and keep an open mind then we hope you will come away with an understanding of finance unlike anything you have seen before.


Disclaimer:

SEMI Trading Collective provides information for educational purposes only. We are not a Broker-Dealer nor are we a registered financial adviser. We do not know your situation and have no way of knowing what level of risk may be appropriate for you. We make no specific trade recommendations. The risk of loss in trading options can be substantial so please be aware of all risks before placing any live trades. Hypothetical computer-simulated trades are believed to be accurately presented but actual profit and loss may vary due to market factors such as liquidity, slippage, and commissions. All information provided here is for your personal, non-commercial use only.

Birds of a Feather

“Birds of a feather flock together.” So why don’t we as retail investors? I want to spend some time discussing this based on my time spent trying to network with others and meeting with trading groups.

I have had a difficult time trying to find other traders with whom to discuss option trading much less to collaborate on trading system development. I have already written about trading as a lonely pursuit.

If I were a conspiracy theorist then I would say this happens by design. “Divide and conquer” must be an institutional mantra because working unchecked, we [retail traders] fall prey to heuristic thinking. This probably contributes in large part to the fact that 80-90% of retail traders lose money to institutional coffers.

Except I am not really a conspiracy theorist.

Varied style preferences are perhaps the biggest reason traders have difficulty hooking up. Preferences are responsible for what tickers I like to trade, what software I like to use, what time frame I like to trade, and many other considerations. Incongruity amid any of these factors may be sufficient for incompatibility. If I am lucky enough to find a trading group where 10-20 people come together then what’s the probability I will find matches across the spectrum?

Aside from individual preferences, differences in personality traits can derail a potential partnership. I may not like anger, sarcasm, conceit, or laziness. It’s almost like we need eHarmony’s 29 dimensions of compatibility to discover who will get along. This isn’t like a corporate job, either, where people are forced to cooperate or be fired. When we can walk away without obligation, we will. I have found traders (myself included) to be a very fickle lot.

Bottom line: when I overlay the low probabilities of finding an overlap in style with finding a solid personality match, it’s no surprise why the trading space ends up seeming sparsely populated. Suddenly it makes more sense why people turn to commercial means (e.g. selling newsletters, trading services, or forming “trader education” companies) in an effort to create a following and to foster community.