Mark’s interview questions came to life from many of his followers via the request feature.  The readers had a variety of worthy questions, and Mark responded with value adding stories.  Read on to get the wisdom of this informed trader with more than 30 years of experience.

“Mark, can you walk us through your career roadmap? I’d love to know more about your experience as a Ph.D., your involvement at the CBOE pits, and your career as a writer/blogger/educator.”

That question encompasses a bunch of topics and most of my lifetime.  After Brooklyn College, I went to Northwestern University in the fall of 1963, and fell in love with the Chicago area.  I spent 4 1/2 years at Northwestern, and when I was not in the lab conducting my research, I could be found playing bridge in local clubs.  I attended larger, out of town tournaments, when time permitted.

After graduation, I was hired by Monsanto as a senior research chemist in 1968, at what to me was a great salary of almost $17,000 per year.  I moved to a suburb of St. Louis and was soon transferred to Akron, Ohio.  That’s where I met Sandy, one of my bridge friends who was a branch manager for Bache (now part of Prudential), a national brokerage firm.  In 1976, he bought a CBOE membership and was commuting home on weekends (and found time to chat we me about his CBOE experiences) to be with his family.

I had already been trading options (since 1975) and was very interested in what he was doing.  To make a long story short, a relative of his wanted to buy a CBOE seat, but wanted someone else to do the on-floor trading.  That’s when Sandy recommended me.  I met with the seat owner, we connected, and he hired me.  Thus, there’s not that much to report about my experiences as a chemist.  It was a short career

I received some training by First Options, a clearing firm, including the fact that options have theoretical values.  I learned how to use the computers of that time and learned how to value options – something that many of the market makers at the time eschewed.

Stories about the pits are not easy to describe.  It was constant personal battles in our pit.  Other pits acted as a group; ours provided very competitive markets for the public customers.  We did anything to undercut each other, to the benefit of our customers.  That’s not the path to big profits for market makers, and one of the main reasons I reject all those who blame market makers for any and all problems they have when trading options.

“Well, you have had quite a change migrating from Ph.D. in Chemistry to market maker.  What was the motivation behind it?”

This is not going to sound ‘right,’ but I never loved chemistry.  I was good at it, and just continued taking classes.  I had no real career guidance and had no idea that this was not a good profession for me.  I had always loved the idea of playing games, and trading is a very big game with very big prizes.  I never gave any consideration to becoming a trader, until offered the opportunity to trade for a living.  I made a quick decision to try it.

As an avid game player, I found trading to be thrilling and a real-world, full-time game. The ability to work for myself, the chance to earn some good money, and I suppose the ability to leave the laboratory and work in an exciting environment was too much to resist.

“Can you tell us more about your trading experiences? In particular, what were some of the obstacles faced throughout your career? Any hard lessons learned?”

I faced one huge obstacle: Mark Wolfinger.  I was given excellent advice and guidance.  I was told how important it was to minimize risk and protect one’s assets.  I heard it, but so what?  I was gaining confidence quickly and understood how to make money. However, that big obstacle, whose badge was ‘WOL,’ got in the way.  I took risks, collected the rewards, and took more risks.

Eventually I lost the risk wager and took a big hit when the market surged in Apr 1978.  I was just short too many call options, naked.  I had not covered my shorts when I could have paid 1/8 or 1/16 (we traded in fractions at that time).  Why waste money buying back worthless garbage?  Today, I know better, and do what I can to pass along that lesson.  Some listen; some don’t.  It’s one of life’s lessons that cannot be taught by listening to others.  Too many traders need to get hammered for themselves before they get it.

“Discipline” is the name of the game.

“So how did you become the expert in options? What does it take to get there?”

I try to keep things as simple as possible; I do not try to earn the maximum edge on every trade.  I do not go to the expense of trading flat (neutral) every Greek.  I do not try to trade for a few pennies per trade. That’s for big time professionals with huge computer power and large trading staffs.  I concentrate on strategies that are easy to understand and for which the risk can be managed.

My expertise is in education.  I’m well-suited to be an educator for the world of rookies and beginners.  Sure, I can provide guidance for the more experienced traders, but my ‘expertise’ is in making the world of options understandable to the person who wants to learn how to use options.

I’m not a believer in recommending specific strategies as the solution.  I’m nothing like those online hypesters who claim ‘make 10% every month.’  Instead I’m a believer in teaching people to make their own decisions.  I explain what I do for my trading and the rationale behind my choices, but always make it clear that these choices may be unsuitable for the client or reader.  Thinking for yourself is where my emphasis lies.  To me, that’s the best way to be fair to the readers and give them the best chance to succeed.

To ‘get there’ is similar to many things in life.  Practice and more practice.  That does not mean only paper trading.  It means trading and learning.  There’s a popular theory among psychologists that it requires 10,000 hours of practice before you can call yourself an expert.  That’s a long time and requires dedication.  I have no idea if it applies to options trading, but no one can become an expert overnight.

“Right.  That’s for sure.  Now, what is your current trading style?”

I sell premium, but never naked.  The only exception, and I seldom do this, is to sell a naked put if and only if I want to buy shares at a discount to today’s price. I also sell credit spreads, often as iron condors.

Furthermore, I protect the downside because I think this economy is a disaster and I do not understand why the DOW is 10,000 and not 5,000.  I am not a good prognosticator, so cannot afford to trade from the short side.  However, I can own positions that earn a profit on a black swan opening.

Lastly, don’t be greedy.  Don’t wait for expiration.  Don’t collect the last few nickels on a trade.  Adjust positions when needed (or before it’s needed) to preserve assets.

These are the hallmarks of a very conservative trader.  I was much more aggressive in recent years, and I would never encourage anyone to own a portfolio that is similar to mine.  But I encourage accepting my belief that successful risk management is the key factor that determines a trader’s long-term success.

“Lastly, what is your perspective on trading for a living?”

It’s difficult.  It takes discipline, and it requires one not to depend on profits immediately for living expenses.  While it’s true that some strategies may provide earnings immediately, you cannot assume immediate success.

A professional trader cannot ‘need’ to make money this month to pay the bills.  Therefore, if you have the comfort of a cash reserve, if you have the patience to learn, if your family is supportive, if you learn before trading, and if you gain some experience first, then you have a chance to become a successful, full-time trader.

Now keep in mind that not everyone can succeed at this profession just as not everyone can be a professional athlete.  There are psychological considerations and personality traits that play a big role.  If you have no discipline, you have no chance (unless you want to gamble, and I don’t recommend that.)

Mark, thanks for the pleasant conversation.  Many readers are learning from your wisdom, and we hope you continue to educate the curious.

Having been exposed to what trading is like since 8, he now has plenty of credentials including SeekingAlpha certification.  In this interview, he shares his background along with some insight on how to gain an edge in trading.  Enjoy!

“Phil, correct me if I’m wrong, but you are best known for the investment site you manage (Phil’s Stock World).  However, you’ve had quite an

interesting background and experience, especially from your entrepreneurship aspect.  Can you give us your career roadmap?”

Once upon a time I was Director of Network Sales at Intelligent Electronics, who were acquired by IM back in 1997.  I was there in the 80s, when you actually had to be quite a geek to design a computer network and I was a real technophile back in the bad old days of computing.  I left that job to start Delphi Consulting with my father, who was a Systems Analyst and in the mid 90′s I started a Real Estate Data company called Accu-Search which grew big enough to be acquired by DataTrace (a division of FAF) in 2004.  After that I concentrated on General Corporate (sales, efficiency) and M&A consulting and, of course investing.

“What led you to starting Phil’s Stock World?”

As an investor, I had tried many different stock and options newsletters and found them lacking to say the least.  I already had people asking me for market advice all the time due to my consulting work and my tech background was invaluable helping me sort the wheat from the chaff in the dot-com era so I was already a known stock picker and before I knew it I had thousands of readers.  What started as some postings on Blogger in 2006 turned into Phil’s Stock World and gained a life of its own.  I think we fill a real need in the marketplace for real information without all the BS – people really respond to that.

“With the emergence of new communities like StockTwits, the exposure of trader web sites and blogs are increasing.  Now, as a seasoned player in this field, do you have any tips for the new comers, or even the experienced ones?  What helped you get to where you are today?”

LOL, that’s a tough one as I’ve had several marketing consultants tell me we’re doing everything wrong.  We don’t advertise, we don’t go for promotion and we give away free trials of our newsletter because we don’t want people to sign up for a Premium Membership UNLESS they are sure they want it.  Our site is very different as we (Optrader, David and myself) are on-line chatting directly with our members during most trading days.  We don’t make calls and run off to do a TV show, we’re there following the markets with our readers, adjusting strategies, commenting on the news and answering questions live, when it matters.  I can’t help other stock guys if they aren’t ready to make that kind of commitment to their members – that comes first.

“How long have you been trading?  What is your main trading strategy?”

I’ve been trading since I was eight years old.  My grandfather in England was an investor and he would sit down with me on weekends and go over his portfolio and we’d read the paper and he’d tell me about what companies he liked and didn’t.  My job was to circle all the stocks that were nearing their 52-week lows and he would go over those to see if there were any “values” to be had.  The first stock my Grandpa Max bought for me was Cadbury’s, who I had been pestering him to buy and had come down sharply as there was a sugar shortage driving the price up.  My grandfather and I agreed that it was a short-term issue and not likely to affect their long-term outlook so it became my first stock.  I’ve been a value investor ever since and I use option strategies as a way to both leverage and hedge my investments.

“Do you have any strategies you can share on how you screen the stocks and determine your entry/exit points?”

As a fundamentalist there is no 5-minute guideline to identifying value but I will say that the simplest way to describe it is patience.  Find a stock you like, follow it long enough to get comfortable with it’s trading channel and, when the opportunity comes and they get near the bottom – BUY THEM.  When they move back up near the top of your value range – SELL THEM.  Investing is governed by greed at the top and fear at the bottom, if you can learn to play the middle, you can do very well for yourself.

“Do you have any big success/mistake stories?”

I called the top of this market too early.  In the summer of 2007 I thought stocks were way overvalued and the financials were in trouble and got a reputation for being an alarmist.  Of course no one was laughing by the end of 2008 but sometimes you can out-think the market when you focus too much on fundamentals and not enough on mood.  I did learn from that mistake and called a bottom to the market on a TV show called LiveStock on March 6th of this year, while the market was crashing and every MSM talking head was screaming SELLSELLSELL,  I laid out half a dozen bullish plays that afternoon, mostly in financials, that had huge returns – so now I’m a “guru,” go figure…

http://www.mogulus.com/livestock/ondemand/pla_6332938475165233151?initthumburl=

“What would be the key concepts investors need to learn in order to become a successful investor?”

Patience and balance.  We assign all our new members to watch a film that (hopefully) teaches patience and just this Wednesday I had occasion to quote Mr. Miyagi, who said: ” Better learn balance. Balance is key. Balance good, karate good. Everything good. Balance bad, better pack up, go home. Understand?“  Substitute “trading” for “karate” and you can’t have a better summary of how important good portfolio balance techniques are to successful trading.

“Lastly, what are some of the investment resources out there that you use on a regular basis?”

I’m a big reader.  I read the WSJ and the New York Times cover to cover every day and then I hit the web and read my own favorite bloggers, many of whom now reside on our site under a section we call “Phil’s Favorites.”  Seeking Alpha also has a great collection of writers and then I’ve got a pretty large cross section of the normal data providers I go to for research but for me, it’s all about the quarterly reports and the financial statements and those you can find anywhere – the rest is timing and, if you watch your news flow and pay attention to world events, you can get a pretty good handle on that most of the time.

Not only did he climb to the top of the hill swarmed with competition to become one of the few Premium StockTwits Network members, he is also Nasdaq’s Top Data Junkies, has over 2600 Twitter followers, and owns his own TV segment on StockTwits TV.

Now that’s talent.

So how did he get there? Read on…

When people think “electrical engineer” they generally relate that to big complicated circuits and other hardware-related topics. But that’s not necessarily the case, as there’s different specialities you can go into with an EE degree. I focused on digital signal processing, random processes, and some statistics. Having that sort of background is very helpful, especially with options. Options add an extra dimension of time, so you have to consider the statistical distribution of a signal (stock price) over a certain amount of time as determined by the option contract specifications.

My career path has definitely centered around the social web– I’ve come into contact with a lot of really smart and talented people, and I would not have if I didn’t have the ability to socially leverage my “brand” through twitter, blogging, and comment reputation via Disqus and intense debate. All of the people I’m working with now have been the result of months of developing relationships with no real expectation of a business endeavor. It’s critical to develop relationships before there’s money involved; if you just go out to random people and start pitching, they won’t listen.

There’s a clear distinction between knowledge gained when it comes to trading. First is book knowledge– I went out and picked up books that I felt were relevant with what I wanted to do. The rule of thumb with trading books is that the uglier the cover is, the better the information. Books with a celebrity or flashy graphics on the cover generally will be tripe.

Second is practical knowledge, and this was the hardest to gain before this set of information permeated through the internet. The best way to get this is following successful traders online. Many have blogs that you can read– the ugly rule applies here too, but not as much. Approach any fancy sites with a dose of skepticism. You also want to watch out for “gurus” that have plenty of hindsight bias and a lack of transparency. The best finance bloggers are the ones that admit they have been wrong in the past.

Third is psychological knowledge. This only comes when you have skin in the game and have the ability to lose money. Until you’ve actually done that, you haven’t been stress tested. This is what separates true success and failure for trading and active investing. Learning about the natural bias that traders have as well as looking to overcome your own will give you a leg up on 80% of the traders out there. Keeping a trade journal is the best way to analyze oneself and is critical when starting out.

The goal of IWO is to Enhance returns, reduce risk, and print money. Options give you all that, but it’s going to depend on your strategy. If you want leverage, you can easily get that on the options market. Front month at the money options for AAPL are currently giving you a 19x leveraged return vs buying the stock in a non-margined account. But the trade-off with options is the extrinsic, or premium, you’re willing to pay for the added protection and leverage. So you can be a premium buyer or a premium seller, and it’s dependent on your strategy.

Sometimes, though, options just suck. If you’re day trading sometimes the options are less liquid and the market makers aren’t playing nice, so it just makes sense to play stock.

With each options trade, you need to come in with a clear idea of how much you are willing to pay for the trade. That’s your risk, and it’s what you’ll lose if you’re trading thesis is wrong. You can do that by looking at the delta of the option, which is the change of the price versus the change in the underlying, and close the position if the stock proves your thesis wrong.

You can also look at other fixed-risk plays such as verticals, calendars, and iron condors that can give you a better range of profitability without the risk of just buying options.

I started IWO around October-ish because I wanted to put my trade ideas out there in real time, and gain some exposure in the finance community. I felt that building a reputation was something I wanted to do, and I also wanted to share ideas with the community that helped me with the practical knowledge.

There’s famous, and there’s internet famous. Being internet famous means that noone knows who you really are except a core group of people that know you really well, and that’s what has developed with IWO. There have been people that were following me when I was just on my own video stream drinking beer Wednesday night and talking stocks.

I feel that we are really on the ground floor when it comes to a well developed financial community. Stocktwits has some great ideas coming out here soon that I haven’t seen anywhere else. We’re just beginning when it comes to the social aspect of finance, and online finance TV is just on the cusp of an emerging trend. I’m so glad I was able to catch the trend just starting, and I plan to ride it up until Oprah mentions it, then I’m selling out.

There’s a handful, if you go to my twitter page you can see who I’m following– that’s a good place to start.

I don’t make predictions like that! Instead, I want to keep a balanced portfolio where I make money over time by selling premium, and use that premium to make trades in individual stocks.

As my next guest for the  interview series, I present to you Michael Sincere, an author of several investing related books including the one I’ve reviewed recently.  He certainly gets my vote as an author of quality books offered at an affordable price.  I mean you can buy the books for under 15 bucks.  If you think that’s expensive, I suggest you find interests other than investing.  Or at least go look for other jobs.

I hope you enjoy his interview.  I’m particularly interested to find out about his next endeavors in writing.

“Michael you are known as the author of several investment education books.  How did it all get started? What is your background?”

My entire family was involved in the stock market so I was introduced to investing and trading at an early age. For my first book, I was influenced by Jack Schwager’s book, Market Wizards. But instead of interviewing traders, I interviewed fund managers and successful investors. I then put all of their advice into a book. After that, I wrote a series of books aimed at beginning investors on how to invest or trade in the stock or options market.

“Do you currently invest?”

I am currently 50 percent in cash and 50 percent in the market. I’ve been so involved with various writing projects that I haven’t been as actively involved in investing and trading. I learned a long time ago that successful investors and traders have to be focused on the market. When I’m unable to focus, I tend to pull back.  That’s where I’m at right now.

“If so what is your trading platform/strategy?  Options vs Stocks? Long-term? Short-term?”

When I was actively trading and investing, I’d invest in mutual funds, stocks, and options. I had both long-term and short-term strategies.

“Do you have any personal investing stories you can share? The good and the bad?”

When I first got involved in the stock market, it seemed so easy. I was making money and I hardly had to work very hard at it. It seemed like everything that I traded went up in price. It shouldn’t be surprising that before long I lost almost all of my gains. I wrote my first book to help other investors avoid the kind of mistakes that I made, for example, I listened to tips, invested in companies I didn’t know much about, and I overtraded.

It took many years but I finally found an investing and trading style that fits my lifestyle. I am not interested in making a killing in the market but hope to make strong and steady returns. Eventually I learned to take my own advice!

One recent story: I was interviewing some of the top traders in the country last year for an article I was doing on the stock market. That weekend, they all said market was going to crash. Monday morning, the market opened up 800 points down. What I didn’t anticipate was the market was going to keep dropping nearly every day for a month! As it turned out, no one else did, either.

“What have you been working on recently? Do we get to see a new book coming out?”

I recently finished two novels and am working on getting those published. I am also working with a publisher to write another nonfiction business book. I still do a lot of freelance writing on trading and investing.

“Last but not least, what would your advice be on how to become the next investing expert? What does it take?”

I have learned over the years that very few are experts. To be an expert, like in any field, you need training, experience, dedication, discipline, and knowledge. The experts also have really good instincts about what works and they have the guts to follow their instincts. Few people can reach this level.

On the other hand, it is possible to achieve strong and steady returns in the market, and most important, to not lose money. That should be the goal for most people. My advice, which is the advice given to me from the traders I interview, is to start small. Whether you trade in stocks or options, start with 100 shares or 1 options contract until you have met your goals. The biggest obstacle to success is our own emotions. If you’re able to find a simple but sound strategy, keep your emotions under control, and learn everything you can about investing and trading, nothing should stop you from being successful in the market.