Publication: Futures (Cedar Falls, Iowa)
Date: Saturday, February 1 1992
Jim Ritterbusch: Nice trades result from rough hours
Jim Ritterbusch's background involves some rough company. Vietnam, graduate school and energytrading could make him a tough customer.
But when you ask him to name one of his proudest achievements, his response is simply
Ritterbusch is vice president of energy research and trading with Carson Petroleum, a distributor in Burr Ridge, Ill., just west of Chicago. Although he's one of those nice people, he's an aggressive oil trader.
"I take the old-school approach: Work hard and put in a lot of hours," Ritterbusch says.
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0) PHOTO : An aggressive energy trader, Jim Ritterbusch prefers a mix of a) fundamentals, b) technicals and c)long hours.
1) He uses all the basic technical tools: charting techniques, momentum indicators, oscillators and relative strength indexes.
2) He tries to limit positions to five or six days.
3) "My biggest mistake, probably the same as any other trader, is overstaying my welcome in a position," he says.
4) And risk-averse, Ritterbusch puts a lot of time and effort into designing spread trades.
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"They're easier to stay with, meaning I sleep better at night, and the exchange margins are lower," he adds.
"I know where technicians are coming from - I'm sympathetic," he says. "But technical traders don't do enough. Nothing replaces good, old-fashioned hard work. You have to collect and analyze information to have an edge. You have to have some indication of major market forces."
He uses Telerate's energy market screen service and relies on talking to people in the business.
"I contact a network of people," he explains. "I'll talk to people on the Gulf Coast, jobbers on the East Coast, to find out what's going on out there. I try to touch base with people in the market, trade ideas and confirm things I hear."
Ritterbusch also builds forecasting models with econometric models using multiple regression, a statistical technique that suggests numerically how factors are related to what you are trying to forecast.
"For the product markets, I've used some American Petroleum Institute data on stocks," he relates, "and I look at the ratio between offtake and supply."
Other sources help. He reads Futures, Business Week and Forbes and tries to follow daily news.
But sometimes those fundamentals get crazy. Ritterbusch says some daily news factors are overrated, but that's where he finds opportunity.
"For political news, like assassination rumors, I take advantage by putting on the opposite trade," he says.
Oil and politics often mix, but that shouldn't cloud traders' thinking, Ritterbusch contends.
Do political biases interfere with his decisions?
"In 18 years, that's the best question I ever got," he responds. "I certainly have political preferences. Sometimes that can be a factor that bears on one's opinion."
Tax policy is a classic example. While politically driven, it has strong economic effects. And while a tax might raise some costs, he says it might shift the demand curve down.
"It probably wouldn't affect my decision, but one could confuse the trade view with the political and philosophical view," he notes. "I think I can separate the two."
His past covers areas where mistakes are costly and he's made a few - and learned something.
"My biggest mistake, probably the same as any other trader, is overstaying my welcome in a position," he says.
He tries to limit positions to five or six days.
And risk-averse, Ritterbusch puts a lot of time and effort into designing spread trades.
"They're easier to stay with, meaning I sleep better at night, and the exchange margins are lower," he adds.
Trading oil-complex futures and sometimes options on the New York Mercantile Exchange, Ritterbusch also hedges his firm's cash positions.
"I trade crack spreads for hedging but also because sometimes I just can't pass up an economic inefficiency," he says, citing as an example when the crack spread is far from refiner margins. "In an up market, the spread widens. In a down market, it contracts. If we're long gas, I'll sell gasoline futures and buy crude futures. It depends. If I'm really aggressive, I'll sell outright."
Ritterbusch advises new traders to work hard and enjoy the work: "Put tremendous time and effort into it. I start at 6 or 6:30 a.m. after a 50-mile drive. The exchange closes at 2 p.m., but your day often starts then. So you have to like it."
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