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Browse Topics:    Trading Strategies    Research & Analyze    

A Day in the Life of a Trader: Jeff Chiappetta

Schwab’s Senior Trading Education Specialist Kevin Horner talks with Jeff Chiappetta, VP of Trading Services, about his daily approach to trading.

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Thanks, Lou. I always learn something great from these panel conversations. I tell you, they're awesome. So Jeff, I want to welcome you to Schwab Live. Thanks for being with us today. We're obviously very excited to have you on board in trading services. Early today, we've spoken with T3Live's Scott Redler and Adam Johnson of the Bullseye Brief about how they manage their day to day trading activity, their processes and such. But can you provide our viewers with a synopsis of your role, and maybe how it impacts and shapes your approach to trading?

Jeff Chiappetta: Yeah. Sure. Thanks, Kevin. So my role at Schwab is to lead the teams that are really responsible for everything related to the client experience for active traders and active investors, and that includes even our educational offering that we write content and we deliver content. And it really is – it's the greatest job, because I love interacting with Schwab clients, talking about the markets or talking about strategies. And my passion is around trading, so I really get to combine a passion of mine with a really, really great job. It's not too often where you can say you work for a great company, you work with really engaged clients –

Kevin Horner: Right.

Jeff Chiappetta: – and you can combine that with your passion.

Kevin Horner: Absolutely. I couldn't agree more, except for the fact that I have the best job at Schwab, and that's not you.

Jeff Chiappetta: Right. Right.

Kevin Horner: Okay? But beyond that, can you tell me a little bit about your – the timeframe that you have? Because you have a lot less time on your hands when it comes to investing in trading. So your process has to differ, I assume, from a great deal of our day to day traders and what not. Can you explain a little bit about how that process helps you?

Jeff Chiappetta: Yeah. Sure. So for me, I'm 100 percent committed to my work. That's why – that's why I wake up in the morning. I'm going to work to really engage with our clients.

Kevin Horner: Right.

Jeff Chiappetta: So I really had to develop strategies over the course of time that allow me to engage with clients, but also engage with the market as well.

Kevin Horner: Sure.

Jeff Chiappetta: So for me, it was really about identifying strategies where I could do just that. I can't watch every tick in the market. As much as I'd love to watch the E-mini futures all day long, every tick, I can't. That's not my role. My role is to work at Schwab.

So I've developed strategies, and probably more importantly, ways to identify ideas really efficiently and effectively, and do it at a time where maybe it's before the market opens or even in the evenings.

Kevin Horner: Okay. So you spend – a lot of your downtime is research, development, and then implementation of a trade probably takes you the least amount of your effort.

Jeff Chiappetta: I think so. I think so. I think the key is building the strategy, and that's where a lot of the time comes in. And then once you build screens and ways to generate ideas, that's easy, after that, because really, I could click a couple of buttons, and in a couple of minutes, I can have ideas to invest or trade.

Kevin Horner: So you might suggest that you rely on something like Screener Plus, for example, the tool in Street Smart Edge. You've built out a couple of different strategy screens, so to speak, that'll generate a list for you on a day to day basis, and give you some insights. And then you build those trades based on the results of those screens?


Jeff Chiappetta: Yeah, look, I can give you a couple of examples.

Kevin Horner: Please.

Jeff Chiappetta: So I know your previous guest talked about selling premium –

Kevin Horner: Yeah.

Jeff Chiappetta: – in the options market, which –

Kevin Horner: Absolutely.

Jeff Chiappetta: – to me is, if done right, and you manage your risk, is a really, really great strategy. Personally, I really like selling cash secured puts. So for me, I've built a screen that says look for stocks that are A and B rated using Schwab equity ratings.

Kevin Horner: Okay.

Jeff Chiappetta: Look for stocks with higher volatility, because the higher volatility stocks means you might be able to get a little bit more premium on those options.

Kevin Horner: I like that.

Jeff Chiappetta: And then I also like to look for stocks that are reporting earnings in the next say 7 days or even 30 days.

Kevin Horner: Okay, so –

Jeff Chiappetta: So when you have that combination, you're going to have a higher volatility play potentially, expanded implied volatility, with the hopes that the stock goes your way, and the puts expire worthless.

Kevin Horner: Right.

Jeff Chiappetta: The key is, though, if it doesn't, if it doesn't – if the trade doesn't work out, you know exactly what you're getting, which is you're going to own the stock.

Kevin Horner: Right. And that's where the equity rating comes into play, right?

Jeff Chiappetta: Right.

Kevin Horner: Because you're solidifying the longer term viewpoint with an A or B rated Schwab equity rating position, so you're comfortable being put the shares of stock. You're actually – it's – either side of this trade works well for the trader. You're happy to take in premium, happy to let that contract expire worthless and take your subsequent risk off the table. You're equally happy to be an owner of a stock you wanted to own in the first place, but at a better price, and subsequently reducing it by the amount of your premium anyway.

Jeff Chiappetta: Right. And I think the key – the key thing to hammer in on is risk management and money management.

Kevin Horner: Absolutely.

Jeff Chiappetta: We see common mistakes. I know you've seen this, too, with some of our clients, where they sell premium, but instead of selling one contract or five contracts, they seek premium, and they say, ooh, I'm selling ten contracts or twenty, and the problem there is if it goes against you, then you're much more leveraged than you thought.

Kevin Horner: Absolutely. Couldn't agree more, by the way. I mean, we – as traders, we have a tendency to get really into what has happened most recently, right?

Jeff Chiappetta: Right.

Kevin Horner: It's really easy to allow what has occurred on my last three, four, five trades to drive my subsequent decision making. And I want to limit that. I find myself relying on my trade journal, my notes, just to remind me, hey, this hasn't always worked out your way. It's really good to challenge your successes and remember that not every trade has gone exactly as your most recent one has.

Jeff Chiappetta: Right. And trading is hard. We know this.

Kevin Horner: Yeah.

Jeff Chiappetta: This is –

Kevin Horner: I totally agree.

Jeff Chiappetta: – it's not an easy thing to do. So you really have to spend the time educating yourself and putting time into research and screeners, and know that you're going to make mistakes, and things aren't going to go your way.

Kevin Horner: Absolutely.

Jeff Chiappetta: When you think of a really good hitter in Major League baseball, they might have success 30 percent of the time.

Kevin Horner: Yep. That's –

Jeff Chiappetta: Or 35.

Kevin Horner: – that's Willie Mays. That's a Hall of Famer right there.

Jeff Chiappetta: Right.

Kevin Horner: Absolutely.

Jeff Chiappetta: And they're okay with essentially failing 60 or 70 percent of the time. And I'm not suggesting that that's good in trading. But making mistakes and having losers is okay.

Kevin Horner: Well, it's not great in trading, of course, but by no means does that mean it's problematic. The best part about that kind of a ratio is if you've built your trade appropriately, if your risk to reward ratio fits appropriate, and you're right as little as three out of ten times, you can still be profitable. You can still be making money. I mean, that's the – to me, that's the key component. I speak about that a lot in the educational webinars I offer, and in the trading community. I think it's a big part of being a successful trader. Risk management throughout your process, and then in your case, I have to imagine, sticking to that plan. It becomes a lot easier for you, if I'm not mistaken, only because you're relying on the tools at your fingertips, right? You're relying on bracket orders and giving yourself exit strategy above and below, and then you're basically letting the trade go. You're not manipulating that day to day.

Jeff Chiappetta: Right. And I think if the trade goes against me, the key is I don't care.

Kevin Horner: Let it go.

Jeff Chiappetta: It's okay.

Kevin Horner: Absolutely.

Jeff Chiappetta: I'm not going to try to double down. I'm not going to try to get back at the market. And I think that's –

Kevin Horner: Oh, the revenge trade.

Jeff Chiappetta: – a – that's a pretty – a pretty common mistake that we see.

Kevin Horner: I definitely agree with that. I'm not a big fan of the revenge trade at all.

Jeff Chiappetta: Hate trade.

Kevin Horner: So I – the hate trade. Boy, sounds like a little bit of fun, but it – rarely has it worked out for me, so –

Jeff Chiappetta: Yeah.

Kevin Horner: Really, Jeff, thank you so much for joining us today. It was a great conversation. I appreciate it.


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