The Rabbi Of Day Trading
On a good day, day trader Mayer Offman makes most of his money in the first hour after the stock market's opening bell. By 10:30 a.m. one recent morning--his shirtsleeves rolled up and his fingers flying across several computer keyboards, like a pianist's--Offman, along with his assistant, had already executed 250 trades, or about one every 15 seconds. His seven computer screens track his positions: $16 million in shares he bets will go up, and $16.7 million pegged to head south. "The morning's over," he says at 11 a.m. "The easy money has been made." A computer screen flashes his net for the hour: $440,000.
This was no fluke. The 15-year veteran Offman is an old-school trader, one of about 5,000 such professionals nationwide. With as much as $55 million at stake at any given time on about 100 stocks, Offman is risk-averse and generally market-neutral, though this year he's been more bearish. He won't bottom-fish in illiquid stocks, and he never, ever tries to outwit the market. "Trading is not a major thought-out process; it's reaction and instantaneous reaction," says Offman, nicknamed "Eyes" by co-workers who say he has a photographic memory of a stock's trading history.
Offman, 49, is also a rabbi. Maybe it helped, but thousands of novice traders haven't had a prayer against an unmerciful market this year. The drubbing in the tech-rich Nasdaq--where 15% of the average daily volume is generated by day traders--has undone the undercapitalized greenhorn.
Those aren't the traders you'll find in "Mayer's Room," the most coveted of trading rooms at Carlin Equities Corp. in Manhattan, a firm he co-founded in 1992. Besides the money made and lost there, the 800-square-foot room is unremarkable: The walls are bare, and there are six long rows of desks on which computers are stacked ten-deep and two-high. The 12th-floor office is above the landmark Radio City Music Hall, though no one would know it from the inside because the shades are drawn. There are about 30 men and women who trade here and a few television sets, but hardly a sound is heard except for the occasional "Oh my God Almighty," and the pounding of fists on desktops. "For the first and last hour there's no talking, no joking," says Neil Schwerd, a trader who sits near Offman. "We do this for a living."
By the market's close, Offman has made $60,000 more, ending his day $500,000 in the black. His best trade was shorting 5,000 shares of Goldman, Sachs & Co., netting $23,000 in 40 minutes. His worst: He lost $11,000 in one hour by shorting 700 shares of Broadcom Corp. It's days like this that Offman says have earned him $23 million, in 2000, after making $22 million in 1999.
Offman's big returns are the kinds of numbers that appeal to day-trading wannabes. But "only one in 200,000 has the genetic capability of being successful," says Robert P. Deel, president of Duarte (Calif.)-based Tradingschool.com. Sucked in by the long-running bull market and low-cost online trades, almost everyone thought that day trading was easy money. Not true: The Electronic Traders Assn. says 90% of traders are unsuccessful and leave the business. They lose the $50,000 they generally start with, plus whatever they've leveraged, or borrowed on margin.
Surviving the odds has nothing to do with researching companies' balance sheets or price-earnings ratios. Because they have a long-term view, investors need a bull market to make money--day traders do not. Short-term investors exploit the supply and demand imbalances that occur second-by-second throughout the day, and they usually close out positions by the time the market closes. Offman goes with the market trend; there's no cheap or expensive stock. Experts also have an edge over beginners, who have a hard time shorting stocks. Shorts must be made when a battered stock reverses direction, a counterintuitive move for the inexperienced. "It's more challenging for new traders to profit in down moves," says Marc Friedfertig of Broadway Trading.
Offman has shorted the market almost all year, getting his cues from after-hours trading. If a stock slumps in after-hours trading, he says, it will be down in the morning, too. "Once the market goes up the next day, we short immediately after that," he says. "Even if you're immediately wrong, the trend will reassert itself."
Many traders in the firm like to do their own thing and don't listen to his advice, says Offman, who makes a daily 11:30 a.m. broadcast call to 40 of Carlin's offices nationwide with his "intuition" about the direction of the market and individual stocks. Offman, who attended New York's Yeshiva University in the mid-1970s, and business school at night, partnered with Ronald H. Shear, a former market maker on the American Stock Exchange, to launch Carlin, where thresholds to join up are higher than most. Some traders aren't allowed to execute options trades; others need a minimum of $100,000 in their account to do so. Applicants are grilled on strategies and are asked to provide statements from prior trading. "We want people interested in wealth-building, not gamblers," Shear says. What about commissions? On trades of up to 1,000 shares, the firm charges its 1,300 retail customers $19.95 per trade for the first 149 trades made within a month, and $14.95 for each additional trade. As traders mature, they graduate to a special cadre who trade Carlin's capital and usually split the profits 50/50.
At that level, explains Robin Dayne, a national day-trading coach, "These guys trade from their intelligence. If emotion comes into the equation, then they're not realistically dealing with the market." To be sure, Offman's most valuable asset may be his ability to remain detached about his job. And that's where his religion likely comes in. Although he's not a practicing rabbi, the Torah's teachings, he says, allow him to find a peace outside work. "You've got no shot at being a trader," he says, "if you've got chaos in your outside life."