Dan is an author, trader and former member of the Chicago Board Options Exchange (CBOE) and CME Group. Dan has written two books on options trading — “Trading Option Greeks” and “The Market Taker’s Edge.” He is also the founder and CEO of Market Taker Mentoring, Inc., a leading options education firm that provides online options education, options newsletters and personalized, one-on-one coaching for option traders.
Dan began his trading career on the floor of the CBOE as an equity options market maker. He also traded agricultural options and futures on the floor of the Chicago Board of Trade.
In 2005 Dan joined CBOE’s Options Institute and began teaching both basic and advanced trading concepts to retail traders, brokers, institutional traders, financial planners and advisors, money managers, and market makers. In addition to his work with the CBOE, he has taught options strategies at the Options Industry Council (OIC), the International Securities Exchange (ISE), CME Group, the Philadelphia Stock Exchange and many leading options-based brokerage firms. Dan also contributes to financial media such as TheStreet.com, FOX Business News, Bloomberg Television, National Public Radio (NPR), and the CBOE blog. And he has a weekly featured video on CBOETV.
Let’s hear from Dan:
When did you first get started in the trading business?
When I graduated college in 1993 I knocked on every door of the Chicago Board of Trade Building until someone gave me a job.
Can you remember your very first trade?
It was an SPX trade in the pit. A 5 lot, I think.
When did you first realize that you could become a full time trader? What gave you the confidence to take that step?
When I went down to work on the exchange, I didn’t really know what I’d be doing. I was just sort of “called” there. But on the floor, I learned that there were people who would back smart young people they believed in. After learning the ropes, I went about finding a backer.
A lot of people want to become full time traders, how much base capital is needed to trade for a living?
I’d say you ought to start out with about $200,000. Again, this needn’t be your own money if you can find capital.
What psychological challenges are involved with trading full time?
You have to be good at losing money. If you can’t take a loss early and stave off future losses, you’ll never make it.
As a traders’ account size grows, small percentage movements suddenly have a large dollar impact. All of a sudden a 5% loss is the equivalent of buying a new car. How did you manage this transition?
When you look at trading as a business, it’s pretty palatable. I’ve had swings of well over $100,000 a day (winners and losers) in my career many times. You just kind of get used to it, I guess.
Do you have any other tips for beginner traders or for those hoping to make the leap to full time?
Start small. Look at it as a business. Don’t let the losers, and more importantly the winners, go to your head.
What is the most important trait of successful traders?
Humility. The market is humbling.
What is your number #1 trading rule?
Only trade when there is edge. Never reach for a trade. If there is nothing to trade today; wait until there is something attractive. Don’t over trade.
What did your trading education entail? Did you have a mentor that guided you in your trading? If so who was it, and how influential were they?
Yep. I was a clerk for a guy named Gino in the bond options. I had to monitor his positions for a couple years. I had to know them as well as he did and answer his questions before he even asked them. It was an invaluable experience.
How would you describe your trading style?
I’m an edge trader. I take various different strategies at any given time. I trade what the market gives me.
You wrote an article on thestreet.com about gamma scalping. How much capital would be needed to effectively scalp gamma? Have you known many retail traders who were successful with this strategy?
You’d need at least $200,000. More is better. Most retail traders can’t do it. (not enough capital, no portfolio margining, can’t figure it out). But there are a handful who can.
What analytical tools do you use in your trading?
Stock charts with various studies. And, most importantly, vol charts.
Are you willing to share your worst trading experience? What happened and how big was the loss?
Early in my career, I had a bad loss or two while I was still learning. I graduated from The School of Hard Knocks. The market is always teaching. A couple of them were big, six-figure doozies.
When did you launch Market Taker?
I launched Market Taker in 2008. I’ve lost count, but we’ve put well over 1,000 people through our classes. We’ve been expanding ever since the day I launched.
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