At a Glance
- Three students from UT-Rio Grande Valley win CME Group Trading Challenge with 182 percent return
- Team traded crude oil futures to run away from competition
When you think of top finance programs, the University of Texas- Rio Grande Valley may not be one of the first schools that comes to mind. However, if UTRGV’s student traders are an indication, the school in Edinburg, Texas is quietly building a powerhouse.
Over two weeks of trading in March 2018, a team of three UTRGV students beat more than 500 student teams from around the globe to claim the CME Group Trading Challenge top prize. Starting with a simulated balance of $250,000, they grew their account 182 percent during the competition, and finished $173,000 ahead of the next closest competitor.
Their total of $706,585 is impressive historically as well. It’s the highest balance any team has reached in the CME competition since at least 2013. That’s a few thousand teams.
They did it trading only crude oil futures. It was a strategy they decided on early in the competition and stuck to once they could see it was working. “The crude market was extremely volatile. And more volatility gave more chances for profit,” says team member Christopher Martinez.
There are ten contracts available to trade during the competition on the CQG platform. These range across six tradable asset classes at CME Group. This is the second year in a row, however, that a team focused on one contract has taken home the top prize. “I believe the best strategy is to focus all your attention in one aspect of the market. Like crude oil for example. To really focus on it, to understand it completely,” says Martinez.
Crucial to this approach was the Energy Information Administration’s weekly petroleum status report, released each Wednesday. Among other things, the report provides an update on the supply of crude oil in the United States, on which CME Group’s WTI Crude Oil contract is based. WTI was also the most traded contract in the Trading Challenge overall.
“If the surplus or the shortage would provide a very good chance for a profit to be made, we took advantage of that every week,” Martinez adds.
A Club for Traders
Martinez acted as the team leader and would execute trades recommended to him by teammates Michael Villerreal and Jose Naveja. UTRGV is a relatively small commuter school, and the team did not have regular opportunities to meet in person. Most of their trading discussion was conducted over WhatsApp. They did have at least one opportunity to meet each week, however, at the school’s trading organization for students, called The Trading Association (TTA).
Perhaps more than anything else, the TTA’s existence is responsible for the participation and success of UTRGV in the CME competition. It’s where the team first met. Villareal is the group’s vice president and Naveja is its treasurer.
“We all have separate lives from school. We work. But this association is something that brought us together,” says Naveja.
UT-Rio Grande Valley is based in Edinburg, Texas
The TTA has about 25 members who meet each Friday to discuss derivatives markets. They don’t discuss specific trades, but many of the participants from UTRGV’s six teams that participated in this year’s competition are members, including one additional team that made it to the Trading Challenge final round.
A Trading Challenge Legacy
Bruno Arthur is the TTA’s faculty advisor and acts as the advisor for all UTRGV trading teams. This is far from his first experience with the Trading Challenge. OpenMarkets profiled his influence at UTRGV in 2014, when he first introduced many students to the competition through his derivatives trading class. That year, three UTRGV teams finished in the top 50 worldwide. Every year since at least one team has made it to the competition’s final round.
Arthur had traded in the competition as a grad student in Kentucky before taking a teaching role at UTRGV. “In many ways I brought this experience with me,” he told us in 2014.
“I try to make sure the students who participated in the Trading Challenge participate again,” he says now. “The plus for us is that experience from previous years stays with us. Some of them are not participating officially. But they’re members of The Traders Association. So that’s important. I like go-getters and when they have questions, they come to my office.”
Among the winning team this year, Martinez and Naveja are planning to trade after they graduate. Villerreal is planning a career in finance. For other traders looking to duplicate the success of the UTRGV team, Martinez, a veteran of several trading competitions, has some advice.
“You have to be ready to lose. It’s a very low chance you’re going to win the first competition you enter. I’ve lost at least six competitions before this one and you just have to keep on trying.”