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Today we have Trevor Vernon, Co-Founder of BookingAlpha, an options trading website.
How are you Trevor?
Trevor Vernon: I'm doing great. How are you, Chris?
Good. Thanks for taking the time to speak with us today.
Can you tell us a little bit about yourself?
Trevor Vernon: I'm with BookingAlpha.com. We also operate a hedge fund here, Booking Alpha Capital. I've been in the market for 12 years now. We trade only options. [But] throughout my years I've traded everything from Forex to day-trading to commodities and everything else. But we [BookingAlpha] do one thing and do it well with options now.
You said you run a hedge fund. How many assets do you manage?
Trevor Vernon: We have less than $15 million right now. It's a very small fund. We were much bigger in the past. We actually liquidated that fund – money for family, close friends and acquaintances. Due to demand, we are gonna be opening for new investors after the first of the year. We're really excited to bring in some new assets and grow the fund.
Have you worked at an investment bank or another hedge fund prior to BookingAlpha?
Trevor Vernon: I was part of a fund a few years ago, back when the world was a little bit different. I was a principal in that fund as well.
What did they do? What kind of hedge fund were they?
Trevor Vernon: The same thing. I headed up the options trading. There were other companies that were under that fund. It was a little bit different from what most people designate a hedge fund. We were more of a holding company, but I directed the securities trading.
What's your outlook on the economy?
Trevor Vernon: I think we're getting underway in this recovery. You know, you hear all these people on TV and hear about the jobless recovery. I kind of have to subscribe to it. If you look at the job market, it's not real strong. But the corporate profits are up.
I think we are strengthening; I do think the markets getting a little overbought right now. I'm not a bear by any means. I'm not even doing the double-dip thing. But I do think that we need – after the first of the year, maybe the first quarter – to give back a little. But I think we're headed in the right direction.
Are there any particular stocks that you like right now?
Trevor Vernon: The markets we play in are almost strictly in the indexes. We do a lot of trading in big-cap tech. But between big-cap tech and the indexes, that's where we lay. We don't get into too many single stock stories. That's a long way of saying we don't have anything on the radar.
When you say big-cap tech, do you mean that you're trading in the Qs or that you're trading options on particular names?
Trevor Vernon: We always trade the Qs. That's a very core strategy for us. We're doing really well right now with Hewlett-Packard HPQ. We're trading some Oracle Corporation ORCL. It's been blowing the doors of things the last couple of weeks. We do have some Apple AAPL, but I think the upside in Apple is somewhat limited right now.
What particular trades are you putting on it?
Trevor Vernon: We don't do many straight calls and puts other than for hedging. We primarily do spreads. We do a lot of iron condors. And moving in and out of those, we don't really take the iron condor set it and forget it principle as a strategy. We move in and out of credit spreads a lot.
For our listeners who don't understand what an iron condor is, could you tell us a bit about that strategy?
Trevor Vernon: Iron condor is really nothing more than two credit spreads on the same underlying. So, to really simplify – let's say a stock is trading at $50. If you sold a spread, let's say at $60 and $62, above the market, you're hoping and betting the stock is not going to exceed that. On downside, you would sell a $40 and a $38 put. And again, you're expecting the stock to stay above that short put before expiration.
What factors go into your decisions? What metrics are you looking at?
Trevor Vernon: Most of what we do is on the indexes. When we say fundamentals, you can't really pull a balance sheet for the Qs and look at the fundamentals. But we are looking at macro and micro events that are going on, and what's happening and how we feel the marketing is poised to those events.
Our strategies are very short term. Our average trade lasts anywhere from about 12 to 15 days. Obviously we have some that last longer than that. But we are at short-term time periods. So we try to take a healthy mix of the technical and the fundamental.
Would you say your portfolio is more bullish or bearish?
Trevor Vernon: I am bullish through the end of the year and into first quarter. Then I say we flatten out and become a little more bearish.
When you're researching decisions, do you have an investment community that you speak with?
Trevor Vernon: Over the years we've built a nice little black book of other options traders, other fund managers, and we're always polling the community out there and bouncing ideas off of each other. It's a pretty dynamic system if you want to call it that, so we're always searching for something new, that's for sure.
Who are some of your mentors? What are some of the lessons that they've taught you?
Trevor Vernon: I don't know that I would stick one person or a couple people with a specific moniker of mentor. There have been so many people over the years – whether they're in the market or not – that have given insight and advice.
I've had clients who have been mentors, if you want to call them that. To me, everyone has their own story, whether it be the way they do what they do, the way they made their money. Or even just the way they look at things and evaluate things. I think everybody has their own insight and tale to tell. I personally love talking to all these different and diverse people and getting their take on things.
Can you tell our listens some of your best and worst trades?
Trevor Vernon: When I get this question, it's always kind of funny. I don't have a best trade [where] we got in and made a million percent in three days, and it was the greatest thing ever. Obviously we've all had home runs, but we've also had strikeouts. Honestly, I've got some of my worst trades have been in the last six to eight months – and not worst trades ever, but more that reminded me to stick to my rules and those are never real fun.
It's so funny. I'll have a pretty nasty trade and get a client, or even myself, say, “What are you doing?” But if you're always right, there's something wrong with that. You're either leaving money on the table or… Maybe I'm just not that good, but you gotta have those nasty trades to have those home runs as well.
The last question that I have for you is: Do you have any advice for Benzinga that you could give to us that would help us enhance our user experience?
Trevor Vernon: If I ask that question to clients – what can we do better? – and I always hate when I get the answer I'm going to give to you. But I think you guys are doing a great job. I love the site. I use it a ton myself – even if it's just trolling for fresh meat and new ideas. I wish that I could say, “Hey, this is a problem,” or “Hey, this isn't working.” But I think you guys are just head and shoulders above everyone else, and I really appreciate you taking the time to speak with me.
How did you find out about Benzinga?
Trevor Vernon: I've used Benzinga for a long time. I don't know how I originally came across them; I think maybe someone had sent me a story that was on there. But I've used it for as long as I can remember.
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