The Market Never Rests: How One Equity Options Trader Spends His Day

At a Glance

  • Trader Scott Bauer on waking up at 2 am and the most important lesson he’s learned in 25 years of trading.

I have been an equities trader for almost my entire adult life.  I spent time trading in the pits at both the CME and CBOE. I am currently CEO of Prosper Trading Academy and I trade “upstairs” while also educating students on the financial markets.

The market never rests.  International markets are more connected than ever, and futures markets can be accessed 24/7. This can be a good and a bad thing for a trader.

The equity markets move not only on specific stock earnings and reports, but more than ever on macro environmental news, geopolitical risk, economic reports and other headline risk.  For example, a slowdown in the Chinese economy can certainly affect the U.S. market or certain sectors of our market and vice versa.

“My Trading Day Rarely Ends”

Though I am not actively trading around the clock, my trading day rarely ends.  Preparation for the trading day ahead actually begins at the close of the market the prior day.  I am constantly scanning individual stocks for opportunities, concentrating specifically on volatility and potential earnings reports.

Scott Bauer is in his office by 6:30 a.m. each trading day to start trading E-min S&P 500 futures, among other contracts.

The key to my success is planning ahead and being proactive, rather than being reactionary. I specifically create my “watchlist” of equities/indices to watch with potential opportunity.  Asian markets open at 7:30 pm CST so I am always tuned in to the start of those markets.  Though I don’t set an actual alarm, my internal clock usually wakens me around 2:00 am CST at the opening of the London Stock Exchange.

Short-Term Moves

In addition to monitoring these markets, I closely plan for major economic reports such as GDP, unemployment, wage growth, CPI and the Beige Book, among others.  These reports specifically tend to have the most immediate impact on potential market moves and I need to be prepared both from a risk management standpoint and to try and take advantage of potential opportunity.  I use the term “immediate” because I am a trader, not an investor. I leave my long-term investing to my financial planner.I concentrate on short term moves.

I am typically in my office by 6:30 am  ready to start trading in E-mini S&P 500 futures, E-mini Dow futures, and individual stock and stock options.  Since markets are so closely correlated, I am constantly searching for any arbitrage opportunities between markets.  Risk management is my highest priority. The most important lesson I have learned over my 25 years of trading is never to force a trade.  There will always be another trade to make.

 

Scott Bauer graduated with honors from the University of Illinois Business School, Urbana Champaign, in 1988 with a B.S. in Finance. Bauer began floor trading in 1991 and formed BOTTA Capital Management in 1995. Scott traded equity options, S&P options at CME and was employed by Goldman, Sachs & Co. as Vice-President, Equities Division. He is currently CEO of Prosper Trading Academy and appears regularly on CNBC, Bloomberg Financial and Fox Business as a guest commentator.

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