Stocks & Commodities V. 32:2 (42-47): Interview: Learning The Ropes With Stan Freifeld by Jayanthi Gopalakrishnan

Interview: Learning The Ropes With Stan Freifeld by Jayanthi Gopalakrishnan

So Many Options

Stan Freifeld traded options on the floor of the American Stock Exchange for his own account from 1994–2001. He was a market maker for options on several popular equities including Dupont, Schering Plough, Walgreen’s, CBS, US Surgical, and Biovail. He graduated from the State University of New York at Stony Brook as a double major in pure and applied mathematics. As managing director of McMillan Analysis Corporate Services Division, he now teaches option trading and risk management to students ranging from complete novices to advanced professionals and academics. In his spare time, he plays squash to relieve stress, competes in road rallies with his Ferrari Cabriolet, and tutors local students for the SATs. He is a long-time MENSA member.

Stocks & Commodities Editor Jayanthi Gopalakrishnan spoke with Freifeld on December 6, 2013 about what it was like on the trading floor, what the greek variables are all about, how implied volatility figures into option trading, and how he approaches option trading today.

Stan, how did you get interested in trading and what attracted you to trading options?

I’ve always been interested in math and was pretty good at it. I was an actuary and ended up becoming a principal of a pension consulting company. I liked being an actuary, but I was working long days and sometimes on weekends. I felt like I was spending too much of my time working and not enough time enjoying life and being with my family. I was fortunate in that we were able to sell the consulting company to a British firm that was anxious to get into the US pension market, so they overpaid us a little bit. Because of that, I didn’t have to work right away. I had time to figure out what I wanted to do next.

I knew very little about trading but I wondered what it would be like to be a floor trader. It seemed like being a floor trader meant that I didn’t have to work long hours, since the market is only open from 9:30 am till 4:00 pm. You couldn’t come in early, and you couldn’t stay late. You don’t have to work on the weekends and you are off every holiday. If I traded with my own money and could make a living doing it, I wouldn’t even have a boss. I wanted to be a trader!

I had to figure out what kind of trading I wanted to do. Since I was a mathematician, the idea of having the added dimensions of volatility and time, the different rates of change, and how the price of an option changes when one of its defining variables changes really appealed to me. I decided I wanted to go into trading options.