Market Wizard Jeff Yass

The New Market Wizards

The New Market WizardsJack Schwager’s interview with Jeff Yass in The New Market Wizards was one of the more difficult interviews to pull quotes from. Yass specializes in market markets in options and runs a very large operation. Therefore, most of what he discusses has very little application to how I trade my personal account. There were a few key points that I felt could benefit my trading. Once again, we see comparisons between trading and poker, as well as the theory that anyone with average intelligence can learn to trade.

Top Five Quotes From Market Wizard Jeff Yass:

“The basic concept that applies to both poker and option trading is that the primary object is not winning the most hands, but rather maximizing your gains.” – Jeff Yass

I’m not sure whether I learned this concept about trading and then applied it to poker or if it happened the other way around. Either way, this is something that has always been at the forefront of my mind with respect to both. My goal in poker is never to win the most hands, but to make sure that the pot is as large as possible when I do win.

I really liked that Yass described situations in poker where you have nothing to gain from betting and the check/raise is the best play. This is a concept that I have always had a strong grasp on. There are many situations in both trading and poker where pushing all of your chips in is not the optimal move in terms of long term survival. I need to keep that in mind.

“I learned more about option trading strategy by playing poker than I did in all my college economics courses combined.” – Jeff Yass

I often joke about all the things I didn’t learn in college. This is an interesting take on that. It makes me question whether there is some aspect of my life that I could apply to trading and improve my performance. I think that it can be broken down to the fact that I simply think different than normal people. This is why things like location independent work, the paleo diet, and trend following are so interesting to me.

“The moral is that in trading it’s important to examine the situation from as many angles as possible, because your initial impulses are probably going to be wrong. There is never any money to be made in the obvious conclusions.” – Jeff Yass

Perhaps this is where that different way of thinking can be a benefit to me. I am very curious about this concept of examining a situation from different angles. I have noted many times in the past when my initial impulses was very strong and eventually turned out to be wrong.

I can also remember saying “This is a sure thing!” before buying stocks this past summer that turned out to be losers. I was looking for the sure thing that just had to go higher and it didn’t work.

“Given the nature of market, the chance of a crash is always greater than the chance of an overnight runaway euphoria.” – Jeff Yass

Yass says this in respect to the fact that there is a downside bias priced into options. While he was taking about options trading, it reminded me of the importance of playing good defense with your positions. At any time there could be a sudden announcement, terrorist attack, or natural disaster that sends the market into a tailspin. I need to keep this in mind when calculating my risk.

“We believe we can train any intelligent, quick thinking person to be a trader. We feel traders are made, not born.” – Jeff Yass

If you’re reading my blog, then the odds are pretty good that you already believe this. I just think it’s nice to remind myself during the rough patches that being a good trader isn’t a superhuman quality. It’s just a lot of hard work, time, and effort.