In the blood: Golf and the Options trader
Profile series: Key members of the Gate Capital team as well as those individuals influencing Society
Bruce Williams, Portfolio Manager for The Written Fund, walks up to his ball on the 3rd hole of the Royal Liverpool, Hoylake. The ball lies in the left rough; it is 120 yards to the green, with bunkers front and right. There is a steady, brisk breeze off the coast; the sun is before us.
“You know there is a similarity between the game of Golf and trading Options?”; Bruce says, as he muses between a full-swing 8 iron or a tempered 7.
I smile. Bruce loves the camaraderie of Golf: the opportunity to share and reflect upon Life’s many aspects.
Bruce is a 4th generation investment manager. His great-grand uncle, founded the family firm of O. F Williams & Sons in Liverpool, during the late 1800s. It was his father, Malcolm, who decided in 1967 to accept an offer to merge the practice with Tilney. Thus, it was an obvious step for Bruce to start his career there; which he did – creating a customer database for the imminent privatization of BT. “I had to write the computer code on my own. In those days they had little in-house IT expertise. I was the youngest member of staff but had the most computer skills”, Bruce smiles. “It makes me think of my young colleagues today, except they are writing algorithms and trading cryptocurrencies”.
As Finance was in the blood, so was Golf. Bruce’s father was Captain at Hoylake in 1967. His mother and grandmother were both Ladies’ Captain. Despite the generational passion for the Game, Bruce admits that he hated Golf until he was in his mid-20s. Now it is very much part of his life. “Options, though” and Bruce’s eyes twinkle, “have always been a passion of mine. I love the mathematical clarity and certainty of trading in Options, especially those related to Equities”.
Bruce is somewhat of an authority on Covered Options. He used to conduct seminars in their use during his subsequent career positions at Options Direct and Rensburg (which became Investec). Bruce has made Hoylake his home; for his wife, four daughters and their many dogs.
To Bruce, Options provide a degree of certainty in a market of dynamic flux. “Maybe that is why I have invested in the Hoylake Lifeboat station, renovating it and locating my business there”; Bruce reflects, looking towards the 3rd green. Options are a form of risk-mitigation; a safe haven in the turbulent world of Equity investing.
As Bruce stresses to all his clients: if one is going to invest in Equities one should consider trading in Options – it adds protection as well as the potential for additional gain. That elusive ‘additional alpha’. Properly used, Options (puts and calls) provide the additional benefit of managing both volatility as well as time; allowing one to reap some additional basis points of return.
Bruce shares his surprise at how few investors in the UK bother to use Options as part of their investment bag of clubs. As Bruce explains, most Equity investors are ‘long only’ in nature. They buy a stock and hold it for a prolonged period. Most of these ‘long only’ investors are potentially missing additional gains. Bruce’s clients are satisfied with his Options approach. That is why he has launched a UCITS fund, www.thewrittenfund.com, which is focussed on Covered Writing of Options (mainly calls).
In the US, the use of Options in equity investments is near common place. Amongst other reasons, such use may explain the greater wealth creation of US based investors. Yet, in Britain, there is a deep-seated traditional aversion to the use of Equity Options.
As Bruce states: “If your target return is 25% and you can generate that for less risk, then the possibility that it might-have-been-a-greater-return is largely irrelevant”. Prudence and certainty. According to Bruce, Options trading is a very sound investment approach, especially in periods of volatility, such as today.
We are still on the 3rd fairway. Bruce caveats his metaphor that it can be challenged, but explains: “If you imagine your Equity investments to be the whole 18-holes, then each choice and swing of the club represents a decision”. He instructs: “Use all the tools available to you! Then, you have an opportunity to play on each shot - for par or that hero swing”.
Bruce considers his position, decsion made, chooses the safer 7-iron. A full steady swing. The ball arcs up and right before settling on the green, to the left, 3 metres from the pin. A birdie in the offing.
An enormous grin breaks out across Bruce’s windswept features: “I love what I do!”
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Justin Jenk is a business professional who enjoys discovering and connecting dots.