James Cordier started his trading career as a commodities broker at a small Milwaukee investment firm in 1984. Computers were in their infancy then. Trading was still done with a paper ticket, a pen and a telephone.
James clients consisted primarily of Midwestern farmers and locals. Trading both futures contracts and options, James used those years to learn the “old school” way of researching commodities markets. “When all else fails” one old soybean farmer told him, “you count the beans.”
This piece of wisdom and many like it instilled in James the value of knowing the fundamentals of any commodity he was trading.
After nearly a decade of trading commodities, James had become an accomplished market researcher. However, turning that knowledge into cash proved a challenge.
“Making money consistently was hard” James admits, “Not because the price ranges are necessarily hard to project, but because your timing on buying or selling has to be nearly perfect. Fundamentals can tell you what to buy or sell. They just can’t tell you when.”
“Trading futures contracts successfully involved a lot of luck, and a lot of losing. And buying options was like scratch off lottery tickets…”
James also became an accomplished technical trader at this time. However, he found their ability to time a price move lacking. His conclusion? Trading futures contracts successfully involved a lot of luck, and a lot of losing. And buying options was like scratch off lottery tickets – most go in the trash. In his opinion, neither was a solid method of investing – or a way to make his clients consistent returns.
It was at this point in the mid 1990’s that James read an article about a professional trader who made a living selling options. Having piqued his interest, James began an intensive study of the option selling strategy. He wanted to know who was on the other side of all of the option buyers he had watched lose money. It was at this time, he began working with his clients to incorporate option writing into their trading.
Encouraged by the experience and feedback from his clients, James became convinced that Option Selling was a way to “level the playing field” for individual investors against fund managers and commercial players. Not only that, he slowly but surely became passionate in the belief that selling options could tilt the odds in favor of his clients. He knew at that point that it was time to strike out on his own.
In 1999, James founded his own firm, with an eye towards option selling as a key component. Shortly afterwards, having noticed that very little knowledge or guidance was available to individual investors in the field of option selling, the firm that became OptionSellers.com dedicated itself exclusively to selling options. Its mission: To bring the institutional strategy of option selling to the individual investor.
Michael Gross began his trading career at a Tampa trading firm in 1996. His initial “training” was in buying options. His firm preached the merits of buying options to customers. While trading futures contracts was also part of the regimen, buying options was both encouraged to brokers and the broker’s customers. “Limited risk, unlimited gains” was the mantra proudly preached by the firm’s supervisors. After watching many of the firms clients lose money using this approach, Michael switched to a different firm – hoping for a better trading plan for his clients.
“I had hoped to keep my clients for life – not for 6 months.” he commented later.
But the new firm, and the one after that, sang the same tune.
“The question was never ‘how can we better make money for our clients?’ It was ‘Which options should we buy today?'” Gross remembers. “They weren’t bad people. They just didn’t trust their brokers to manage money (probably for good reason.) Buying options was easy. It was a good pitch. And they required very little maintenance. They could buy em and forget em.”
“You had to be really right and have perfect timing. Otherwise, the options just died on the vine…”
But Gross also remembers that it was tough for clients to make money. “You had to be really right and have perfect timing. Otherwise, the options just died on the vine. Even in the rare case when you had a winner, it was very difficult to decide where to take the profit. Miss it by one or two days and that option value could just plummet. It was a tough way for a trader to make any consistent returns on capital.”
One day, Michael looked up and realized that there wasn’t another broker in the room over 25 years old.
“It was at that point, I realized if I didn’t figure out a better way, I wasn’t going to be in this business very long” he said.
It was around this time that Michael began experimenting with selling options with some of his clients – much to the chagrin of his supervisors.
Despite encouraging results and positive feedback from clients, Michael’s “option selling experiment” was frowned upon by the firm. “They didn’t want independent thinkers,” he said, “they wanted you to follow orders.”
Eventually, he went looking for a firm more friendly to selling options. That was how he found Cordier.
“I had read his market comments several times in the Wall Street Journal” says Michael. “He seemed like a real pro. So one day I gave him a call.”
Eventually, they met. Michael could not believe his luck. Not only was Cordier in the same city, but he was also a proponent of option selling.
“At the time, nobody else was doing it.” He remembers. “It seemed like karma. I begged him to hire me!”
Michael joined James’ firm shortly after its opening in 1999. With like minded values and similar demeanors, Cordier and Gross set out to introduce the world to their newly “discovered” approach to investing.
Progress was slow at first. “We were used to dealing with futures traders. They were ‘run and gun,’ Gross remembers. “They weren’t really sure what to make of it.”
But Cordier and Gross pressed on, confident they were on to something. They began publishing their work. And a funny thing happened.
“We still weren’t convincing the futures traders,” Cordier reflects. “They were in it for thrills.” But we started getting calls from mainstream investors, stock option traders, and people looking to invest retirement funds. That’s when we knew we might be in a whole new ballgame.
One day, an editor at McGraw-Hill called. She had been reading Cordier’s work in the field of option writing. “I’ve never read anything like this before. Nobody knows about this,” were some of the comments Gross remembers.
A book deal soon followed.
“Then the press started calling,” Cordier chuckles. “And they still call today.”
Call they did. Cordier, his work on Option Writing, and his insights into the fundamentals of the commodities markets have been featured by CNBC, The Wall Street Journal, Investors Business Daily, Bloomberg Television, Fox Business News, Forbes, Yahoo Finance, BusinessWeek, MarketWatch, ABC World News, the BBC, and Morningstar Advisors, to name a few.
Today OptionSellers.com is known as the “go-to” experts for anything option selling by both media and the investment community. Cordier and Gross remain at the helm but now their services are only offered to an exclusive group of high net worth investors.
“Even though, we’re managing the account for them, we still like to work with each individual on a personal level,” explains Cordier, “and you can’t do that with 10,000 clients. So we had to limit our intake.”
The firm now offers an elite program that works with high-net worth investors from across the globe.
With the investment landscape ever changing, Cordier continues to see a bright future ahead for his option selling approach.
“It’s all a matter of doing the right homework coupled with applied odds. It’s quickly adaptable, can work in any kind of market environment, and is uncorrelated to almost anything. It can be a durable, high odds, diversified investment.” He quips.
“That never goes out of style.”