Steve Cohen – Masterful Trading Strategy Wizard
Steve Cohen is an American investor and the co-founder of S.A.C. Capital Advisors. Cohen is famous for two things: an outstanding track record in managing money and for indirectly being charged with insider trading (his fund S.A.C. Capital Advisors pleaded guilty). He was interviewed in Jack Schwager’s Stock Market Wizards.
This article looks very briefly at the life and trading career of Steve Cohen, and we end the article by taking some of the most interesting quotes.
Steve Cohen’s life and trading career
Steve Cohen grew up in a Jewish family in Great Neck, NY. His father was a dress manufacturer in Manhattan’s garment district, and his mother a piano teacher. Steve was the third child among seven brothers and sisters.
He liked poker games during his high school years and made bets with his own money in tournaments. The game taught him how to take risks and he caught a great interest in speculating endeavors. He graduated from John L. Miller, Great Neck North High School, in 1974. He also played on the school’s soccer team.
Steve earned a degree in Economics from Wharton School at the University of Pennsylvania in 1978. While in school, he was inducted into the Zeta Beta Tau Fraternity’s Theta Chapter — he served as treasurer. A friend helped him open a brokerage account with $1k from his tuition money during that time.
After graduating from Wharton School in 1978, he got a job on Wall Street at Gruntal & Co. as a junior trader in the options and arbitrage department, where he made an $8k profit. With time, he made about $100k for the company every day and was eventually made to manage a $75 million portfolio and six traders.
He simultaneously ran his own trading group while at Gruntal & Co., starting from 1984, and continued managing it until he began his own firm, S.A.C.
In 1992, Cohen founded S.A.C. Capital Advisors with $10 million initial capital from his savings and an additional $10 million from outside money. The company’s name “S.A.C. Capital” was coined from Steven A. Cohen’s initials.
In 2003, the New York Times wrote that “S.A.C. is one of the biggest hedge funds, and is known for frequent and rapid trading.” And then in 2006, The Wall Street Journal reported that although Cohen traded rapidly and never held on to his positions for a long time, he now holds an increased number of positions for much longer. As of 2009, the S.A.C. had about $14 billion in assets under management.
Throughout the late ’80s, the S.E.C. became suspicious that Steve used insider information to trade. He was investigated when he betted that R.C.A. and G.E. would merge ahead of the announcement. The S.E.C. called him to testify to the Securities and Exchange Commission, but he refused to answer their questions, stating his rights against self-incrimination.
From then on, the S.E.C. started keeping a close watch on some of his other investments, especially those that involved Brett K. Lurie. On November 20th, 2012, He was implicated in a suspected insider trading scandal involving a former S.A.C. manager, Mathew Martins. The S.E.C. also charged other employees of the firm from 2010 to 2013 with different consequences. Martins was found guilty in 2014 in what federal prosecutors referred to as the most successful insider trading conspiracy in history. They agreed to pay $1.8 billion in fines. However, Steve was prohibited from managing outside money for two years as part of the settlement agreed upon in the civil case over his accountability for the scandal.
Steve has donated $715 million to philanthropic causes throughout his life, including charitable causes relating to children and veteran’s health.
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Steve Cohen trading strategy quotes
Tape reading is a lost art that today is not very useful.
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It’s hard to find ideas that aren’t picked over and harder to get real returns and differentiate yourself. We are entering a new environment. The days of big returns are gone.
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You have to know what you are, and not try to be what you are not.
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I’m looking for people who are not afraid to take risks.
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It’s going to end badly; it always ends badly (about the stock market in 1999).
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You can’t control what the market does, but you can control your reaction to the market.
How did Steve Cohen enter the world of finance?
After earning an Economics degree from the Wharton School at the University of Pennsylvania in 1978, Cohen began his financial career on Wall Street. He started as a junior trader at Gruntal & Co., eventually managing a $75 million portfolio and six traders.
When did Steve Cohen establish S.A.C. Capital Advisors, and what was its initial capital?
Steve Cohen founded S.A.C. Capital Advisors in 1992 with $10 million of his savings and an additional $10 million from external sources. The firm quickly grew to become one of the largest hedge funds, managing about $14 billion in assets by 2009.
What legal challenges did Steve Cohen face during his career?
Throughout the late ’80s, the SEC investigated Steve Cohen for suspected insider trading, particularly regarding his bet on the merger of R.C.A. and G.E. In 2012, he was implicated in a scandal involving a former S.A.C. manager, resulting in a $1.8 billion settlement, and a two-year ban on managing outside money.