Advantage Futures

Trader’s Perspective

Interview with John Richards, Founder/Owner, Webster Capital

September 2009

Investing in your future.

As technology and globalization continue to change the face of futures trading, John Richards of Webster Capital has made a career of searching out the next big opportunity. He attributes his success to a disciplined approach to trading combined with an eye for the future.

John Richards, founder and owner of Webster Capital, is a businessman–and he is in the business of trading. John realized early on in his career that to have longevity in this business, you need to do a whole lot more than just trade. Today he spends about 80% of his time looking for the next big opportunity – whether it be new products, new markets or new technology. His philosophy is simple – leverage new opportunities, have a disciplined approach to risk management, and always diversify your trading. He has built his career by constantly staying ahead of the curve and he doesn’t appear to be stopping anytime soon.

John began his career as a clerk in the Chicago Board of Trade options pits, progressing to a trader in the 30-year Treasury option pits. There he developed his skills in risk management and understanding of spread trading. Once these markets began to mature and he had to work harder for less gain, John took a hiatus from trading while he worked in fixed income sales at UBS. John reentered futures trading when he recognized opportunities in trading Eurodollars as they were moving to the screen through the introduction of CME Globex.

As electronic trading began to gain traction, John knew technology would become increasingly important to his trading. He decided to become a client of Advantage Futures and Trading Technologies. Both firms were investing heavily in infrastructure and electronic connectivity at that time. While trading CME Eurodollars proved to be lucrative for a period, John learned an important lesson in product diversification as interest rate trading took a turn for the worse. When CME began clearing NYMEX energy products through CME Globex, John recognized another opportunity with a developing marketplace. He quickly signed on as a market maker in NYMEX products and fine-tuned his spread trading strategies to include crack spreads and calendar spreads.

Around the same time, John realized that high speed and low latency could provide meaningful advantages for profitability. He worked with Advantage Futures to colocate servers in close proximity to the CME matching engine. This dramatically improved his execution times and afforded him the opportunity to trade efficiently from anywhere in the world. He continues to diversify his trading and add more complexity with algorithmic trading. His Webster Capital team recently expanded to 15 employees to meet his ever-growing needs.

With the right technology and trading methodology in place, John looked for additional markets to leverage his skills. His attention turned to the grain markets where he saw an opportunity to trade the crush spread in a manner similar to the crack spreads in crude oil. Today, John is one of the largest traders of the soybean crush spread.

Recognizing that good strategies have a very short half-life in financial markets, John has turned his attention to the currency markets and U.S. Treasury futures. While he fine-tunes his strategies in these markets, he already has an eye for the future – with the best technology in place and access to global markets, John sees great opportunities in diversifying his trading to include emerging markets and 24-hour trading.

What can you learn from John’s experience? He urges younger traders to always be on the lookout for new opportunities. He also advocates testing new strategies in a live trading environment rather than “paper trading” where he finds that you never learn like you can in a live environment. To have real longevity in this business, you have to always be looking for new opportunities and testing new strategies. Traders who claim “I’ve never traded that product or I am not awake during those trading hours” will not survive. “Patience, money and the ability to seek out advice from others are all critical in this business,” claims John.

Where will Webster Capital be ten years from now? If they can continue to find and invest in new opportunities, there is limitless potential for growth. “There are more time zones, more continents, more exchanges, and more markets and products for us to explore.” John smiles as he ponders what’s next.

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Related topics: From The Inside, Newsletter, Uncategorized

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