NEW to our OptionsANIMAL Blog is the Friday Market Expert Interview. This is where we are going to interview Experts from around the Stock Market and Options Industry. This gives us, as investors, a look at what is happening in the industry and what the experts are seeing and saying.
Jim Bittman:CBOE Instructor. Mr. Bittman is the author of two books, Options for the Stock Investor, (McGraw-Hill, 1996), and Trading Index Options (McGraw-Hill, 1998). He teaches courses for public and institutional investors, and he has presented several custom courses throughout the U.S., Europe, South America and Southeast Asia. In 1980 Mr. Bittman began his trading career as an equity options market maker at the Chicago Board Options Exchange. From 1983 to 1993, he was a Commodity Options Member of the Chicago Board of Trade where he traded options on financial futures and agricultural futures. Mr. Bittman received a BA, magna cum laude, from Amherst College in 1972 and an MBA from Harvard University in 1974. In addition to his responsibilities at The Options Institute, Mr. Bittman is also a member of the faculty of The Illinois Institute of Technology, where he teaches in the masters level Financial Markets and Trading Program.
Interview recorded 4/6/2010
OptionsANIMAL: What got you involved in the options industry?
Jim Bittman: My father’s hobby was trading in the stock market while I was growing up. So when I came to Chicago after college. in the 70’s we opened an account with a brokerage and started trading conservative strategies like covered calls and bought some call options. Then I met some people who were at the exchange and when I turned 30 in 1980 I became a member of the CBOE…in 1994 I had to choose between full-time trading and educating full-time and I chose educating and instructing.
OptionsANIMAL: Are you currently trading?
Jim Bittman: I am trading as an individual investor just like the people in your classes do. I am not a market maker anymore. I am a full-time educator and part-time retail investor.
OptionsANIMAL: When you are trading today, what are some of your favorite trades?
Jim Bittman: There are 3 things that I do: I have one thing that I do that is a momentum approach to picking stocks where I watch the new high lists that are printed every day, I look for the new names that are on the new high list and I wait for a pull back in those stocks and then I buy the next time they hit a new high. Second: I am a huge believer in credit spreads, so I will find stocks that I think are trending either up, down or sideways. If it is trending up, and there is not an earnings event imminent, than I will sell a bull put spread; if it is going down then I will do a credit call spread, and occasionally I will do an Iron Condor Approach where you do both. But every step requires judgment. I always try to do credit spreads between earnings. Third: I have a 401K and I have good quality stocks in that account and I sell covered calls on those stocks. Those are the three things that I do.
OptionsANIMAL: Are you watching the entire market in all three approaches or do you have a watch list that you follow?
Jim Bittman: I have a watch list of about 35 companies, 10-12 that are between the earnings cycle at a time, that tend to be the higher priced stocks, $80 and up. I want to get a reasonable premium when I sell a credit spread.
OptionsANIMAL: What advice do you give someone who is just getting started in the options game?
Jim Bittman: If someone is just getting started I tell them that they really need a group of people who they need to get together with. There are many groups out there and OptionsANIMAL is a place where people can learn and grow and find their own trading style. But you must start slow and be controlled, commit yourself to a schedule and a time. This business is not for everyone, and beginning investors have to figure out if the really love it. And to do that you need people that you can talk to, ask questions of, and then listen in an open minded way. If you do that then you will grow and get better.
OptionsANIMAL: What changes do you see coming in the options industry in the near future?
Jim Bittman: The big changes have happened with the way we process electronically, and the dramatic narrowing of bid/ask spreads. And commissions may still get lower, but conceptually but the basics of the business in picking good quality investments and trying to identify the trends in the market have not a probably won’t change. The fundamental part of identifying good trades will not change.
We Thank Jim for taking time to visit with us and are glad that he is on our side and is willing to help our students understand a market that is so volatile!!! I hope this preliminary interview helps you understand who Jim is and how he plays the game. Take his advice and get some practice and help to learn it. See his next interview coming sometime in July.