Students Win Commodities Challenge
School of Management students beat out Yale, UT-Austin and other top schools for first place in the NYMEX Commodities Challenge 2008.
May 6, 2008
A housing market crisis. Depressed consumer confidence. Volatile oil prices. None of these could dampen a phenomenal 35 percent return for a group of graduate students from the School of Management trading oil and natural gas contracts in the futures market.
Of course, they were fake trades and the cash exchanged was funny money, but taking first place in the 2008 National New York Mercantile Exchange (NYMEX) Commodities Challenge was the real thing. The team was awarded a cash prize of $1,750.
The UT Dallas team of graduate students competed against 29 teams from institutions including Brown University, Columbia University, George Washington University, Pennsylvania State University, Quinnipiac College, Syracuse University, University of Texas at Austin, Rice University, University of Houston, Hofstra University and Yale University.
The Challenge consisted of two parts: the electronic trading competition, held from Feb. 13 to April 8, and the “open outcry” competitions for individuals held at the University of Houston on April 19 in a mock trading pit.
For the electronic competition, a team of UT Dallas undergraduates and another team of graduate students traded NYMEX crude oil and natural gas futures using $100,000 and $250,000 allowances. The UT Dallas undergraduate team finished the first round in fifth place. That team consisted of Danh Nguyen, Josh Svendsen, Mai Nguyen, Tiffany Nguyen and Vincent Tran.
By finishing fourth after the first round and five weeks of electronic trading, the UT Dallas graduate team moved on to the final round against UT Austin, George Washington and Hofstra. The team grew its imaginary investment balance from $250,000 to $328,000. The victorious UT Dallas electronic trading team members were Adib Motiwala, an MBA student; Marc Kramen, a graduate student in accounting; Kumar Damania, an MBA student; and Xiaoshi Liang, a graduate student in finance.
“We knew if we exercised risk controls, we would do pretty well in this long competition,” said Motiwala.
“The markets were very volatile throughout the challenge, and we used that to our advantage,” said Liang. Marc added that commodities depend on many factors.
“We kept an eye out on the U.S. dollar, geopolitical risk, supply levels, U.S. interest rates and OPEC production levels among other things,” he said.
For the “open outcry” competition, students called out trades in a mock trading pit made to look like the real thing. UT Dallas undergraduate and graduate students competed individually against more than 60 students from six colleges and universities. A panel of judges made up of NYMEX officials and floor traders evaluated student-traders on their ability to execute trades correctly and efficiently.
After several rounds of competition, judges identified the top 20 traders, who received cash prizes. UT Dallas graduate students Kramen and Jason Romph received cash prizes by being among the top 20 traders.
“The open outcry is a truly amazing experience. It is very much like the real world. A successful trader has to be a good listener as well as good at shouting out your trades,” said Romph.
A video of the final round of the Open Outcry is available on YouTube at http://www.youtube.com/watch?v=sJytQmV2ht8.
All the students who participated in the Challenge belong to the Financial Management Association (FMA) UT Dallas chapter. FMA is a professional organization whose mission is to serve the global finance community by broadening the common interests between academics and practitioners, providing opportunities for professional interaction between and among academics, practitioners and students, promoting the development and understanding of basic and applied research and of sound financial practices. To learn more FMA and become a student member, visit http://www.utdallas.edu/orgs/fma/index.html.
From left to right are three of the four winners of the NYMEX electronic trading competition Marc Kramen, Adib Motiwala and Xiaoshi Liang.
Watch the video of the final round of the "Open Outcry" for NYMEX Commodities Challenge 2008.