Shownotes
BIO: Brent Kochuba is the Founder of SpotGamma, a financial insights company that applies its proprietary methodology toward modeling index and equity options and then provides unique content to its subscribers.
STORY: Brent joined a former client as a trader in his fund. Five days after he started working at the fund, the market opened a limit down and halted trading. The fund lost so much money, and the only way out was to liquidate and shut down.
LEARNING: Know whom you’re dealing with. Speak up and ask for clarification when things don’t make sense.
“If you’re in a position that is going to make you a lot of money, the risk is likely to be high too.”
Brent Kochuba
Guest profile
Brent Kochuba is the Founder of SpotGamma, a financial insights company, which applies its proprietary methodology toward modeling index and equity options and then provides unique content to its subscribers. SpotGamma has thousands of members and has been featured in publications such as The Wall Street Journal and Bloomberg Markets.
Worst investment ever
Brent had been in the institutional broker space for about 15 years when one of his clients—whom he knew reasonably well—decided to start his own fund. Brent chose to leave his then employer to work for this gentleman at this fund. This was in August of 2015. At the time, the gentleman ran a small account. He would short put options—insurance contracts that people often buy to protect themselves if the market declines.
Brent was a trader, and the gentleman was the portfolio manager. Brent had been on the trading desk with the gentleman for five days, and on the third Friday of August, massive trades suddenly started to go off right at the close of trading. Two days later, the market opened a limit down and halted trading. The fund was losing money because the market was dropping. Frantically, they tried to hedge their portfolio but couldn’t and were forced to liquidate and shut down.
Lessons learned
- Know whom you’re dealing with.
- Speak up and ask for clarification when things don’t make sense.
- The more money you stand to make from a position, the higher the risk.
Andrew’s takeaways
- Banks will always take away the umbrella just when it starts raining.
Actionable advice
Understand what it is you’re involved in. Instead of looking for the shortcut, go with the tried and true ways of succeeding.
No.1 goal for the next 12 months
Brent’s company is part of a documentary coming out on MSNBC and Peacock. His goal for the next 12 months is to use this platform to educate people on the power of options and investing in the market.
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