TJ : How have you evolved as a trader ?

MW : It’s a far different world for me now.  First, I’m a retail customer, not a market maker.  But, the big difference is that I am now very aware of risk.  All my risk is finite and limited.  I am more interested in earning a living than in making a fortune, and that conservatism has paid off.

TJ : How long did it take before you consider yourself successful ? And how would you define success ?

MW : I never really considered that question.  For many years, I was playing the game of market making and did not consider the real-world aspects of the money I was earning (think: Monopoly money).  I was very successful in some aspects of being at trader, but less successful in others.   I define success as being happy with my career (and I loved trading on the floor of the exchange) and earning enough (I did) to exceed my needs.  In this business success often means making, and keeping, a fortune.  Well, by that measure, I did not succeed.  I made the big bucks as a market maker, but did not keep them.

TJ : What is the largest contributor to your success ?

MW : Today, that’s an easy question to answer.  Discipline.  Risk management.  Money management.  I wish I had developed those skills earlier.

TJ : What’s your first trade like ?

MW : As an options investor, it was nothing special.  I wrote covered calls on some stock I wanted to buy.  Cannot recall which stock, as it was in 1973.  As market maker my first trade was a ‘gimmie’.  On my first day on the floor, my friend and mentor, Sanford Naiditch asked me to make a market in one of the options in GWF, Great Western Financial.  I did, and he bought one contract at my offer and sold me one at my bid – a net profit of $12.50!  That was my welcome to the CBOE floor.  Others were not as friendly to the newcomer!

TJ : What’s your worst trade and what lessons did you draw from that ?

MW : Not a single trade, but a position. In October 1987 I was short a gaggle of put options.  The painful lesson is that one should not trade with unlimited risk. Today, when I sell one option, I buy another to limit any possible losses to an acceptable amount. 

TJ : What methodology do you use ?

MW : I trade modified covered call positions – and their equivalent.  I sell put spreads (the equivalent of a collar) and some call spreads.  I don’t own any individual stocks unless I write covered calls (with a protective put) on them.  My idea is to make consistent profits and allow those profits to compound over time. 

Part II : The Short Book on Options: A Conservative Strategy for the Buy and Hold Investor

TJ : Your first book Options: A Conservative Strategy for the Buy and Hold Investor and 2nd book Create Your Own Hedge Fund : Increase profits and Reduce Risk with ETFs and Options, is the contents any difference between the three books ?

MW : The Short Book on Options is a primer.  It’s a concise introduction to options for those who have always wanted to get involved with options but have never actually done so.   The emphasis is on being certain the reader comes away with a clear understanding of how options work.  It does not overwhelm with a myriad of strategies, but concentrates on a single methodology.  The 2nd book encompasses that material but goes further.  It includes some background information on Modern Portfolio Theory and how to apply its basic message to options trading.  I then show the reader, in detail, with many examples, two basic strategies for using options conservatively – to enhance profits.  The book uses exchange traded funds (for diversification purposes) as the main investment tool, but the lessons apply equally well to using individual stocks.

TJ :  What motivated you to write your 2nd book ?

MW : I wanted to expand the information provided in the first volume and with John Wiley & Sons as publisher, I could reach I wider audience. The book is not intended for advanced option traders, but is aimed at those who are in the early stages of their options trading careers.
 
TJ : Where did you get the inspiration and ideas for the book ?

MW : From within.  Although I did some research for the 2nd volume, the book contains ideas that I had been thinking about for years. It satisfied my need to help individual investors get started with options.  Options have been misunderstood for too long, and many people – people who should know better - consider options to be ‘dangerous’ for investors.  I wanted to try to set the record straight.  Options were originated (many centuries ago) as risk-reducing tools – and I believe most investors and traders would profit by using options that way, and not as gambling tools.

TJ : Have you incorporated any ideas from the books into your trading and analysis ? Which aspects have you incorporated ? How have it improved your trading and analysis ?

MW : I use the general themes constantly – covered call writing and equivalent strategies.