There are traders, and then there are super traders. Blair Hull unquestionably fits the latter category. He's widely recognized as a heavyweight in our industry, and Forbes even called him, "One of the most successful traders of the last 40 years."
Blair's 40-year trading career has been anything but uneventful, and at times, borderline unconventional.
Stepping back in time to the early 70's, Blair's first encounter with investing came in the form of a widely popular card came at a Las Vegas casino: blackjack. When most people hear 'card game' and 'casino' the next thought is 'gambler.' But Blair never considered himself as a gambler. He'd been initially inspired by the classic card-counting book, Beat The Dealer by Ed Thorp, and was very strategic in the way he played—which gave him an advantage. Although it was only a small advantage, it did put the odds in his favor with enough occurrences (or hands).
During the five years he frequented various casinos, Blair became a member of a blackjack team, after much rigorous testing. The casinos eventually caught on to their ways, and by 1976, all team members had been barred. Though casinos had shut him out, Blair saw opportunity in derivatives markets.
With profits from blackjack to the sum of $25,000, Blair got a seat on the Pacific Stock Exchange and began actively trading, using a quantitative model to profit from misplaced options. He was fairly successful in doing so, fairly quickly, though he does say, "It was much easier to beat the game, much easier than it is today."
In 1985, he founded a premier market making firm, Hull Trading Company, gathering a team of non-traditional trader types (i.e. PhD mathematicians, computer scientists) to extenuate his own trading methods. The firm was centered around automation and leading technology for trading options markets, or as Blair puts it, "We believed that everything we were doing by hand could be done by a machine."
Hull Trading grew at a rapid pace, both by employees and profitability. As Jack Schwager wrote in The New Market Wizards, in the preface to his interview with Blair, "A graph of HTC's trading profits looks like a simulation in one of those trading system ads, except in this case the results are real." At its peak, Hull had 250 employees and traded on 28 exchanges in nine countries. Then in 1999, Goldman Sachs acquired the firm for $531M.
Today, at age 73, Blair is the founder and CEO of Ketchum Trading, a proprietary trading firm that specializes in low-latency algorithmic strategies. And in 2013, he founded Hull Tactical Asset Allocation, LLC, a registered investment adviser that advises and actively-managed ETF.
"If you're missing an edge, there is no reason to play."
For Blair, this is something that's been engrained into into his way of thinking, which stems from his early days playing blackjack. Blair defines an edge as making the same kind of trade hundreds of times, and in the long run, having more money than you did to begin with.
Anytime Blair makes a wager, whether it's the golf course, casino, or in markets, he must have the edge in his favor. Although some traders, typically newer traders, may get joy from participating in markets, missing an edge is only going to hurt you financially.
"All great things that happen in our world, happen with teams—not with individuals."
This is also something that can be traced back to Blair's roots as a card-counter. One of the benefits of being a part of a blackjack team meant, collectively, that they were able to place more individual bets—which would allow them to exploit their edge more, and remove some of the randomness in how results are distributed amongst a small number of bets.
Building a team of smart people also enabled Blair to scale Hull Trading and make abnormal profits, which wouldn't have been possible as a one-man show. Even today, Blair runs a proprietary trading firm which harnesses the power of many brains for greater trading strategies.
While many think of trading as a solo game, depending on how far you want to push your career, this will likely need to change at some point—leverage can extend beyond the financial products we trade and into the skill-sets and knowledge of others.
"I knew the direction of technology, but my timing was off by about 30 years."
This is how Blair summed up his first impressions after arriving on the exchange floor. With some computer programming abilities, he soon realized that it'd only be a matter of time before options markets were completely automated. Although it took much longer to happen than he'd anticipated, he was looking well beyond the current moment in time—and this can be seen in many areas of his career too.
For example; Hull Trading is considered to be one of the pioneers of algorithmic trading, especially for listed derivatives. With the foresight to explore new ways of doing things, his firm was able to seek out a unique advantage. The same can also be seen in his firm's actively managed ETF, which utilizes advanced machine learning techniques to make sense of the recent explosion in data that's become available, and aid in timing the market.
This forward-thinking mindset is something which could be applicable to any trader on any scale; think outside of the box, be creative, and seek your own unique advantage—you just might be rewarded handsomely.
Aaron Fifield is a developing trader, and host of the Chat With Traders podcast. Each week he interviews successful traders and financial thought-leaders to extract their best insight, which is listened to by thousands. Listen to his podcast with Blair Hull here.