Michael Gross is director of research at Liberty Trading Group in Tampa, Florida. After graduating from Indiana University of Pennsylvania in 1990 with a degree in Business Administration, he began his study of the commodities markets. His futures trading career began in 1994 when he started trading contracts in grains, precious metals and energies.

In 1996, Michael became a registered commodities broker specializing primarily in the grain and energy sectors. In 1999, he joined Liberty Trading Group where along with James Cordier, developed various approaches to selling option premium and managing portfolios. Michael remains an active broker at Liberty Trading Group, where he authors many of the firm's research articles and assists in developing trading strategy.

This is the final installment of my recent interview with Michael Gross

Optionetics: How would you characterize your technical approach to the markets?

Michael: I would say the KISS principle applies best to our method. We are watching the same support and resistance levels everybody else is. A breakout in one direction is much more convincing if the market has fundamentals to back it up. We do like using stochastics and Bollinger bands in timing of trade entries. Again however, short term timing of the market is not as crucial with option selling.

Optionetics: What do you think are the greatest misconceptions beginning traders have about trading the markets?

Michael: That there is one "perfect" system out there that will always make them money without fear of loss. I have investors call me all the time that say "I want to make 5% per month and I want to make sure my principal is safe." Well, guess what? If you find a system like that, please let me know so I can invest! There is no such thing as a free lunch. There are some great ways to approach the market out there and some have higher probabilities than others. However, nothing comes without risk. No matter what system you use or what trader you've hired, there is always a chance that you will lose money. Don't be upset when it happens. It comes with the territory.

Optionetics: What kind of advice would you give a person just now beginning in trading the markets?

Michael: I'm a real big believer in getting professional help. If somebody files a lawsuit against you and you need to defend yourself, do you hit the books for six weeks and try to figure out how to plead your case? Or do you hire a qualified attorney? The same applies to trading the markets. Even if you want to eventually learn to trade on your own, I would advise at least learning and trading with a pro to get started. There are some things you just cannot learn in a book.

Optionetics: Can you describe what your average trading and analysis day entails from preparation to execution?

Michael: Sure. The first 2 hours of the day are generally spent reviewing the overnight markets from London and Singapore, reading all the morning news briefs for each market, reviewing our positions, looking at charts, etc. At about mid-morning, we have a daily trade meeting in which we discuss our views on the markets and our portfolios and determine if there are any new trades or existing trades we need to address. If we have a trade we like, we will usually work it throughout the day at the price we like. But never trade on the open. The open is generally emotional trading. The close will tell you where the pros are.

Optionetics: What kind of decision-making process do you go through before deciding on a particular trade and a particular sector of the market that would be worthy of putting on a position?

Michael: Fundamentals first. If we find a market with a strong fundamental bias, we'll look at the technical action, seasonal tendencies, volatility and availability of distant strikes. If all of these are favorable and we can find a strike far enough out of the money, that is when we pull the trigger.

Optionetics: Thanks, Michael, for sharing your thoughts about the trading business with our Optionetics reading audience.

Jeff Neal
Senior Writer, Options Strategist
Optionetics.com ~ Your Options Education Site

The information presented here is strictly intended for educational purposes only, and the News Section of this publication will not follow through on the progress of any of the showcased trades.