Exclusive Interview: Options Expert and Fast Money Trader Jon Najarian
Jon Najarian is one of the most popular options traders on Wall Street. He is a regular anchor on Fast Money and founded the incredibly popular OptionMonster and will be a featured teacher at the upcoming 3 Gurus webinar (click here to learn more).
Jon took the time to chat with me to share how he got started and tips he offers to become a successful trader:
Jon: I began my trading career as a clerk on the Chicago Board of Options Exchange. I had no prior experience because I was only two weeks fresh out of the NFL. In those days you had to learn from a small group of people who employed you. Today is much different with sites like Wall St. Cheat Sheet where investors can get good information.
Damien Hoffman: Jon, how did you and your brother evolve from traders to starting OptionsMonster?
Jon: We started by selling our floor trading operation to Citadel in 2003. Then we developed some proprietary algorithms to collect trading data across all the exchanges so we could comment on it. Once OptionsMonster was rolling, we developed TradeMonster so our users would have a trading platform to make trades in a quick and user-friendly way.
Damien: Jon, your brother and you have played a large role in bringing options trading information from the exchange members to the investing public. What about options makes them worthy of greater awareness?
Jon: Options are excellent trading instruments because you can keep risk to a minimum. You can also gain leverage without risking your entire account or using margin. They are also used as an insurance policy against open stock positions. All of these benefits helped many investors protect themselves in 2008.
Damien: What two mistakes can options traders avoid to become more successful?
Jon: First, the biggest mistake all traders make is trading without an exit strategy. All traders must have an exit strategy. Whether you are trading options or stocks, you should ask yourself two questions: “What am I going to do if this does not work?” and “What am I going to do if this does work?”
Second, don’t be a pig. For example, if you double your money in an options trade, take half off the table and play with the profits. I’ve seen too many traders watch great gains evaporate very quickly. If you don’t manage your money, you are not addressing the inherent risks and unknowns in the markets.
Damien: I’ve noticed that many great athletes make great traders. As a former NFL player, how did your athletic career help you as a trader?
Jon: If you are trading with a group at a firm, then athletes from team sports know how to excel in that environment. If you are an individual trader, athletes know how to use their discipline to be successful.
Successful athletes got up early in the morning to train and practice no matter how sore they were from the previous day. Great traders have the same work ethic. My days in the NFL have played a huge role in my career as a trader.
Damien: Jon, thanks for taking the time to share how you got started and what you recommend for improving as a trader.
Jon: Anytime, my friend. My pleasure.