WHARTON WHIZ SCORES BIG IN FUTURES TRADING
The Wall Street Journal; Monday, July 17, 1995

CHICAGO-Seven months ago, Andrew Nissenbaum didn't know what a futures contract was. 

Then the 21-year-old junior at the University of Pennsylvania's Wharton School took a $2,400 credit card cash advance and turned it into $240,000 betting on future price moves in stock indexes and currencies. 

Now, with his credit card paid off, a new BMW in the garage and enough in the bank to finance his senior year's tuition, Mr. Nissenbaum has leased a seat on the Chicago Mercantile Exchange for three months to pursue his new passion for trading. 

His goal: to learn the skills he'll need to become the next George Soros. 

"To be a great trader it's important to understand the psychology of the market, all the nitty-gritty details," Mr. Nissenbaum says. 

A few weeks into his unusual summer job, Mr. Nissenbaum still draws surprised looks In the rough-and-tumble pit where futures contracts on the Standard & Poor's 500 index are traded. Dwarfed by burly, unshaven clerks and traders jostling on the rim of the pit, required ties knotted loosely around their necks, the slight and Intense Mr. Nissenbaum is nattily dressed in a polka-dot tie and pale blue shirt. 

"I wish I could wear a sports jacket on the floor," he says, eyeing, with dismay, the red-and-black polyester coat identifying him as a CME member and a trader. 

Mr. Nissenbaum stands out in other ways. While many pit traders deal in small amounts of money, profiting from tiny price moves and paying little attention to broad market issues, Mr. Nissenbaum prefers to make longer-term bets based on market fundamentals. 

"I try not to get caught up in all that," he says, gesturing toward the screaming traders in the pit. But he adds quickly that while "some of the guys couldn't tell you the fair market value of a future, they're very good at trading them. That's what I'm here to learn." 

Mr. Nissenbaum discovered the volatile, fast-moving world of futures and options trading while looking for the best way to trade the so-called January effect, the trend for smaller stocks to outperform larger capitalization stocks during that month. A Wharton Professor, Jeremy Siegal, whose seminar introduced Mr. Nissenbaum to the January effect, helped design a complex strategy involving futures contracts on both the S&P 500 and the Russell 2000 index. (Futures allow investors to bet on the price direction of a stock, index or other security at a specific point weeks or months away.) By the end of January, Dr. Siegal recalls, his young protege was worth $35,000. 

Then Mr. Nissenbaum graduated to much riskier options trading. Sharing his newfound mentor's bullish view of the stock market, he sold put options on the S&P 500 index. By selling puts, Mr. Nissenbaum promised to buy S&P 500 futures from the purchaser at a specific price in the future, even if the value of the contracts fell. In return, he collected a hefty cash payment, or premium. As long as the stock market continued to rise, he didn't have to buy and deliver the futures contracts. The bet paid off, Dr. Siegal says, and Mr. Nissenbaum collected more than $100,000 in premiums as the stock market surged in the first half of this year. 

"Andy's a very cool trader," Dr. Siegal says. "He doesn't act like a beginner and let his emotions run over his judgment." 

Mr. Nissenbaum also likes to trade on economic announcements, such as employment reports, using stock futures to profit from Dr. Siegal's observation that while the stock market may initially mirror the bond market's response to new data, it often reverses course later in the day. 

Mr. Nissenbaum says his Chicago sojourn is teaching him to fine-tune the way he implements some of these theories in fast-moving markets. He's learning how to spot a big player moving into the market, he says, and to use stop-loss orders to manage his position. He's also figuring out how to ignore the market's "noise", the rumors and speculation that cause price gyrations throughout the day. Indeed, the amount of "noise" surrounding individual stocks is one reason Mr. Nissenbaum prefers to trade futures contracts, which he calls a "purer" bet on the stock market. 

"He's learning a lot, and has a tremendous feel for the market, but the key to long-term success is discipline," says William Greenspan, a trader at both the CME and the Chicago Board of Trade, who is giving Mr. Nissenbaum the use of his office for the summer. "If you're not careful, profitable trades turn sour." 

So far, Mr. Nissenbaum is still trading profitably. But life at the CME isn't perfect. The pits aren't "a very aesthetically pleasing environment," he observes. "People swear all the time." As a newcomer, without an aggressive personality or a loud voice, he occasionally has to pass trades to desk clerks or place them over a phone to ensure they're executed. While he still loves to trade, Mr. Nissenbaum says he'd rather do it sitting at a desk "in front of 10 computers and a telephone." 

After graduating next summer, Mr. Nissenbaum doesn't expect to seek a job at a Wall Street investment bank. He says he'd rather continue to run money solo. "I'm addicted to the markets, but why would I want to have someone else telling me how I should trade? I like to make my own decisions."