Investing Team Capitalizes on Lessons from Last Year
Lower-Risk Strategy Earns Management Students 2nd Place in Contest
Dec. 16, 2010
A graduate student recruited to lead a School of Management team in a trading contest capitalized on past contenders’ mistakes to devise a winning strategy that led to a 11.6 percent return on his squad’s money — and a second-place finish in the national competition.
Finance student Jason Hills led teammates Crystal Hu, Jyoti Miglani, Hoa Lic Nguyen and Nimish Patel — all School of Management students — to the No. 2 spot in the annual thinkorswim Collegiate Trading Competition.
It was the second year for a UT Dallas team to take second place. A School of Management team last year made a comeback to net a 12.6 percent profit and capture the No. 2 spot. This year, Hills’ quintet grew its virtual opening balance of $100,000 to $111,626 in the annual online market simulation sponsored by the University of Houston Finance Association.
Two other UT Dallas teams that entered the 2010 challenge finished in ninth and 10th place. All 15 UT Dallas competitors belong to the UT Dallas chapter of the Financial Leadership Association.
Hu, the vice president of the chapter, enlisted Hills to his leadership role and was instrumental in making sure each one of their team’s members participated. “I personally just think a team needs to communicate very well,” she said.
After re-reading a news story about last year's contest, Hills learned that only five of the 26 teams that entered in 2009 made money — even though the Standard and Poor’s 500 index booked a 3.6 percent return during the contest period. From this, Hills concluded, “teams were taking really high risks in an attempt to win.”
Those results made the approach his team needed to take abundantly clear to him. “We kept it pretty low-risk and had a lot of cash on hand,” he said. Adhering to a mix of 60 percent stocks, 20 percent options and 20 percent cash or futures during most of the challenge, his team “started out small with options,” Hills said, “and tried to use our gains to keep building.”
Trading on a real-time platform run by online brokerage service thinkorswim, competitors from eight universities traded in stocks, stock options, exchange-traded funds, indexes, and commodity and currency futures. During the seven-week challenge, which ran from Oct. 7 to Nov. 23, Hills calculated the S&P 500 booked a 1.65 percent return.
Experienced traders, Hills and Patel took care of the riskier business, the options and futures trading. With less market experience, the other three team members made many of their core transactions, mainly safer trades in stocks, in the first few days of the competition, Hills said.
Home-schooled, Hills said he “kind of grew up” with investing and trading because “my dad day-traded full time for several years when I was younger.”
Curious about his father’s work, Hills started practicing on Internet stock market simulators in 1995, he recalled. Initially, “I didn’t know what to do,” he said. Taking a chance on a then-new Web browser company he had recently read about, he used some of his theoretical money to buy Netscape soon after its initial public stock offering. The stock “appreciated about 120 percent in a month,” Hills said.
Not all his early investments were as successful, but Hills said he learned a lot from practicing, particularly “about the risks not to take.”
For the last three years, Hills, who would like to go into securities research and be an equity analyst after he graduates next spring, has managed investments for himself and his family.
In the thinkorswim competition, only the first-place University of Houston team, whose ending balance was $143,556, earned more than Hills and his team. The UT Dallas group finished ahead of third-place University of Wisconsin, which closed with $109,104.