The Fall of Lehman Brothers - Interview with Heather McRae, Options Trader and Former Account Executive at Lehman Bros

Hello and welcome to Zing Talk, where Benzinga brings you the biggest names and brightest minds from Silicon Valley to New York City.

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Today our guest is Heather McRae, full times options trader and former real estate executive for Lehman Brothers. How ya doing today Heather?

Good Chris, thanks for having me on.

Great, glad to hear it. Could you start off by telling us a little bit about yourself

Originally from Rochester, New York. Moved to Arizona, went to Arizona State - go Sun Devils. Moved to Chicago about five years ago - love the city here. I don't love the winter, but I think it's the greatest city in the world in the summertime.

How long have you traded options for?

For about two years now.

Explain your options trading process.

Sure, as a general rule of thumb, I like to have the passage of time on my side - depending on market conditions, volatility, etc. But most of my positions are credit spreads. I use standard deviations and volatility. And that's kind of a summary.

What are you trading? Index futures? Specific stocks?

I do mostly index options, I do every now and again a single stock. But mostly IWM, GLD, mostly either ETFs or SPX and RUT.

Who are your mentors that have helped you become a successful options trader? what did they teach you?

Dan Sheridan, Dan Passarelli, Larry McMillan, Fari Hamzei, those guys - I've gotten great value out of their work and what they teach.

What have they taught you?

I learned that probability using standard deviation - I used that from Dan Sheridan and Dan Passarelli. I follow Dan Passarelli on Twitter. He gives a monthly class on volatility, spreads. I've learned all these things from these guys.

What kind of prep work goes into being a full time options trader?

I do quite a bit of fundamental analysis if I am going to do a single stock, whether a spread or a put on a single stock. I don't do many of those, but when I do. I like to see a lot of cash on the books, look at the earnings.

I do a lot of charts for the indices. I always look at the charts, even if I do a fundamental analysis to see how it's doing, to see what the price action has been.

Most of my positions are short term, though, so fundamental analysis isn't as critical.

What did you do before trading options full time?

I used to work at Lehman Bros. What happened there made me sad. It was a great company.

Could you tell us what you did while you were there?

I was in wholesale real estate finance for residential and commercial properties. I was there for about two years.

While at Lehman, did you see or experience any of the downfalls that ultimately caused the banks demise?

Absolutely. I was in real estate finance - so some of of these products we were offering - was much of what you heard on the news, little verification. We once had a product where if you put 5% down and had a high enough credit score, there was no verification of income, employment, etc.

When I sold these products, I never expected it would end up so badly. This is what all of our competitors were selling as well. It was just trying to be the best, sell the most - not “these products just aren't good”. Hindsight is 20-20.

What are some of the outside activities you do that help you become a better trader?

In my personal life - I am in a competitive women's rowing team - training to be better physically in a sport translates to training to be better at trading.

What are your best and worst trades?

My worst trades are always when I am trying to force something or I go into a trade with an initial plan and I don't stick to my plan. You have to know when you're wrong, and know it quickly, and cut it, you save money. It takes learning the hard way - it's going against me, cut it quick.

Outside of rowing, what do you do in your spare time?

I'm either hanging out with my rowing friends, or training and competing. I go out to dinner - great restaurants in Chicago. I do a lot of reading. Constantly reading, constantly trying to learn more. A constant process of learning, learning, learning.

What is your favorite restaurant?

Joe's, it's a seafood and steak place on Grand. It's a really great restaurant. I like the Rick Bayless' restaurant as well. Eve's is another one. A ton of great restaurant.

Thanks Heather. That'll do it for this episode of Zing Talk. Remember to check out the latest market-moving information, commentary and trading ideas on www.benzinga.com.