Home Traders and trading books Blair Hull – Mastering the Trading Edge and Strategy Insights

Blair Hull – Mastering the Trading Edge and Strategy Insights

By
Oddmund Groette
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Blair Hull is an American businessman, investor, Democratic politician, and philanthropist. He was interviewed in Jack Schwager’s New Market Wizards, and most of the info in this article is taken from that interview. Jack Schwager’s Market Wizard series is fantastic for motivational reading about trading.

This article looks at the trading career of Blair Hull, and we end the article by taking some of the most interesting quotes from Jack Schwager’s interview.

Blair Hull’s life and trading career

Blair Hull was born on September 3, 1942, and at a relatively tender age of 19, he was already working in a cannery factory assembly line to support his family. Blair eventually found his way into the financial markets, and today, he is known for his landmark achievements in the trading world.

During his early adulthood, Hull served in the United States Army for six years, attaining the rank of lieutenant. However, upon completing his military service, Hull decided to teach high school-level physics and mathematics before going for higher education. A few years later, Hull bagged a Bachelor of Arts degree in Mathematics from the University of California, Santa Barbara. In addition, he got an MBA from Santa Clara University and graduated from the Harvard Owner/President Management Program.

Thanks to his mathematical skills and a degree in mathematics, Hull became a skilled and disciplined blackjack player, learning from the theories of Ed Thorp. He demonstrated his excellent analytical skills at the blackjacks in Las Vegas, an experience that earned him a lot of money, even more so later when he applied the blackjack edges in the stock market. Hull made so much from various successful wins at the casino floors that he decided to move his accumulated earnings from the blackjack games to the Pacific Stock Exchange and later to the Chicago financial exchanges.

At the Chicago financial exchanges, Blair Hull displayed an outstanding level of trading expertise and eventually revolutionized the financial markets using various advanced technology and innovative models, such as the empirical model he developed for the financial markets. Hull also had a team of skilled card players who could determine when and how to get an advantage over the dealer through the various mathematical systems they operated with.

In 1985, Blair took a huge career step to build his own company — Hull Trading Company. While serving as the chairman and CEO of the company, Hull created multiple job opportunities and grew his company to become a global leader in applying computer technology to listed derivatives trading. It was all about the mathematical trading edge.

The Hull Trading Company became very successful with over 250 employees, including financial engineers, physicists, more than 100 software engineers, and computer support staff. We can argue he applied the scientific method in the financial markets even before Jim Simons did.

However, in 1999, Blair Hull sold the Hull Trading Company to Goldman Sachs for $531 million. He used the proceeds from the sale to build the Hull Investments, LLC, a company that would later go on to serve as the family office for three generations of the Hull family, and acts as the parent company to several financial entities, including Hull Tactical Asset Allocation, LLC.

In 2009, Hull founded Ketchum Trading, LLC, a proprietary trading firm that traded and provided liquidity in futures, options, cash equities, and exchange-traded funds. And in 2013, Hull created Hull Tactical Asset Allocation, LLC. The HTAA operates an actively managed ETF and utilizes advanced algorithms and macro and technical indicators to anticipate future market returns.

Blair Hull has created several academic publications, including “A Practitioner’s Defense of Return Predictability” (May 26, 2015); “Return Predictability and Market-Timing: A One-Month Model” (October 10, 2017); and “Seasonal Effects and Other Anomalies” (April 28, 2018).

Other famous traders and their trading strategies

Blair Hull trading strategy quotes

Blair Hull’s interview is among the best of all in the series of Jack Schwager. Here are a few excerpts and quotes:

I believe the buyer of options has the disadvantage.

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It all goes back to the blackjack philosophy that, if you have the edge, in the long run, you’ll make more money by doing a lot of transactions.

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Your return on capital would be very small if you weren’t trading across markets.

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A lot of strategies promoted by brokers do not serve the interest of their clients at all.

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If you want to guarantee an inferior strategy, do covered calls.

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Some people are fond of saying, “even a poor system could make money with good money management”. This contention is complete nonsense. All that good money management will do for a poor strategy is to assure that you will lose money more slowly.

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No money management system can ever be designed to make money playing roulette, because the edge is against you.

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Probably the most basic requirement for successful trading is that you must have some well-defined method, or, in other words, a specific approach that gives you an edge.

FAQ:

How did Blair Hull contribute to the evolution of trading technology, and what was the outcome of Hull Trading Company?

Blair Hull utilized advanced technology and innovative models, such as the empirical model, to revolutionize financial markets. In 1999, he sold Hull Trading Company to Goldman Sachs for $531 million, marking a significant milestone in his career.

What academic publications has Blair Hull authored?

Blair Hull has authored academic publications, including “A Practitioner’s Defense of Return Predictability” and “Return Predictability and Market-Timing: A One-Month Model,” showcasing his expertise in financial research.

What is Blair Hull’s perspective on covered calls and money management in trading?

1. “If you want to guarantee an inferior strategy, do covered calls.”

2. “No money management system can ever be designed to make money playing roulette, because the edge is against you.”

 

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