Ilya Gurevitch- From Chess Board to Stock Exchange – interview – Goldstein on Gelt – July 2011

Ilya Gurevitch- From Chess Board to Stock Exchange – interview – Goldstein on Gelt – July 2011


The Strategies of Chess and Successful Investing Douglas Goldstein, CFP®, Financial Planner
& Investment Advisor Douglas Goldstein: We are talking with Ilya
Gurevich, who was one of the great chess players several years ago. He retired from competitive chess about 10
years ago and ended up on Wall Street. Ilya, welcome to the show! Ilya Gurevich: Thank you. I’m glad to be here. Douglas Goldstein: You became a chess master
at the age of 12, which is actually quite young. Could you tell me how you managed at such
a young age to develop the lateral thinking processes necessary to become such a great
chess player? Ilya Gurevich: That’s a good question. I’m not sure if I realized when I was 12
that I had lateral thinking processes, but at that point in time I was just a kid who
was good at something, and I really liked it. So with the encouragement of my parents, we
kept going and at some point, I reached the level where I was probably the best chess
player in the country for my age group. Douglas Goldstein: Wow. So your parents were very supportive. It’s a very big concept today that genius
can be learned and isn’t necessarily inborn. Did you work hard to become the best chess
player? Ilya Gurevich: I think I did. I think I also had a knack for the game. I could see things faster than other people,
and it takes a bit of an imagination to play chess. I think I had that when I was growing up. Douglas Goldstein: Let’s switch channels
a little bit. Now you’re an equity options trader, and
I would like to ask you about the connection between equity options and chess. But before we do that, maybe you could just
give our listeners a description of what equity options trading is. Ilya Gurevich: Equity options or equity derivatives
trading is basically the process by which you can invest or you can buy equities without
putting all of your money into buying stocks. You can leverage the amount of money you’re
investing by investing in equities, as opposed to investing in stocks. That is the simple explanation. When you get to equity options trading, that
involves putting positions on and trading one option against another and there are different
strategies. There’s volatility, arbitrage, and what’s
called delta trading, which is directional trading. You can either go long the stock or you can
actually go short the stock, which is another big advantage of options. Instead of having to go to the public and
borrow shares-to-sales short stock, you can do it with options by buying what’s called
“puts”. If you buy a put or if you sell a call, you
are getting short the product that you want to get short, the underlying product. Douglas Goldstein: Okay, so how did you get
specifically involved in derivatives trading as opposed to individual stocks? Ilya Gurevich: I started right after college
with the American Stock Exchange, which was a pretty viable exchange at the time. Right now, it has merged with the New York
Stock Exchange and is no longer active, but this was in 1996 and I started trading about
6 months later and I’ve been doing it ever since. So right after college, that’s what I did,
and chess went bye-bye and Wall Street went hello. Douglas Goldstein: So what’s the connection
between chess and the wins in terms of the way of thinking? Are there certain similarities between chess
strategy and equities? Ilya Gurevich: Yes, there are. You can see them in chess tournaments, and
especially in tournaments that are called “round robin” or “all play all”, where
there are 10 players and you have to play all 9 of the other players other than yourself. You have to study and you have to prepare,
so you have to know the products. You have to know if you’re trading an individual
product, you have to know what the earnings of that individual product are, what it’s
done in the past, and what it’s going to be doing in the future. This is just like in chess, where you have
to study your opponent’s openings. In equity or options trading, or any types
of trading, you have to know your product and you have to know it pretty well. Douglas Goldstein: So it’s certainly the
knowledge. One of the common studies that chess players
do is spend a lot of time looking at the openings of famous games or even many, many thousands
of games. Ilya Gurevich: Correct. Douglas Goldstein: Is that similar to trading? Ilya Gurevich: Yes. You have to look at the characteristics of
the product that you’re trading, how it’s traded in the past, and you have predict with
reasonable knowledge what you think it’ll do in the future. This is just like in chess, where you play
your opponent. You know what he or she has done in the past
and you have to figure out what he or she’s going to do in the future. Douglas Goldstein: Is chess still currently
an important part of your life? Ilya Gurevich: I still follow it pretty well. I know everything that’s going on. I know, for example, that Mr. Gelfand is the
next challenger to Anand in the world championships, and we were all very pleased about that. Douglas Goldstein: Yes, we’re very proud
of him here in Israel too. Ilya Gurevich: Yes. Finally, at the age of 42 or 43, he made it,
which is great. This does not give me any comeback hopes by
the way, but it’s excellent for Israeli chess, I think, and for all chess in general
as well. Douglas Goldstein: Let me tell you a story
about Boris Gelfand. About 12 years ago, as I was walking with
my then 5-year-old daughter down the street, some Russian fellow comes up to me and says,
“Does your daughter play chess?” and I said “No.” So he said, “It’s about time that she
learned.” She was only 5 then, so I said, “Can you
teach her?” He answered, “Alright, I’ll teach her.” So Boris, the Russian, taught my daughter. One day, another Russian guy in town asked
me, “Is Boris teaching your daughter?” and I said “Yes, he is.” They said, “Well, do you know who he is?”,
and I said, “I have no idea. He’s just a nice old Russian guy.” It turns out that he was the trainer for Boris
Gelfand. My daughter still trains with Boris, so let’s
wait another few years and see if she’ll go up against Boris Gelfand and hopefully
become a future world chess champion. Ilya Gurevich: Let’s hope, let’s hope. We’ll wish her very good luck with that. Douglas Goldstein: We’re talking to Ilya
Gurevich who was the former top chess player in the United States when he was younger. He has since has retired from competitive
chess about 10 years ago, come to Wall Street, trades options and he has been talking to
us a little bit about options strategies. A lot of times people think options strategies
are complicated. In fact, when individuals get licensed as
investment advisors in the U.S., probably the hardest part of the licensing exam is
the options section. Do you feel that options trading is something
that normal people should have as part of their portfolio or only professionals? Ilya Gurevich: That’s a good question. About options trading, I’m not sure normal
people should really trade options. Investing, on the other hand, should be a
part of people’s investment strategy. There are plenty of simple option investment
strategies that you can use where you can increase your returns, because you are in
fact trading derivative products. You are getting almost free leverage, and
you can use that leverage to really, really increase your returns. As an example of one simple strategy, there
is what’s called a “buy-write”, where you buy an underlying stock and you write
an equal amount of shares by selling an out-of-the-money call option. And what that allows you to do is capture,
moving the stock. You have a limited upside and you have a limited
downside. However, if you have, for example, a very
quiet market, something like a buy-write will help you capture a greater return on your
investment. Douglas Goldstein: So buy-write strategy would
be, for example, if someone buys shares of stock and then agrees that he would be willing
to sell those shares of stock at a slightly higher price. In return for agreeing to do that, he’ll
receive some money. He’ll receive what’s called the premium
in the call. That’s the strategy I think that a lot of
people often use. Do you feel that cuts them off from the upside
too much? Ilya Gurevich: Of course, you do limit your
upside, but like every strategy there are upsides and downsides. The strategy is that you’re buying stock,
but you’re actually hoping that your stock will go up slowly. If it goes up too fast, then you are limiting
your gains. However, if a stock goes down, what you’re
doing because you sold some premium is essentially buying stock at a lower price as well. Douglas Goldstein: Okay so that’s the buy-write
strategy. Any other strategies you think are appropriate
for regular investors? Ilya Gurevich: For regular investors, I don’t
think so. I think regular investors should be investors
who buy things, not betting against the market going up, and for that reason doing other
strategies that I think would be out of people’s comfort zones. If something does go wrong, and often it does,
that’s when people lose money and that’s not what we want to have normal investors
do. The pain threshold for people who invest money
is much lower than for people who trade money. Douglas Goldstein: So now you’re a professional
investor. This is your day job now? Ilya Gurevich: Correct, unless it’s talking
to you, Doug. Douglas Goldstein: Well, I’m glad. Come on every week, and we’ll talk about
the market. Do you think that the decision-making processes
that you developed from a very young age as a chess player are something that you’re
applying today in the world of trading? Ilya Gurevich: Definitely, like I said, preparation
is something that’s common to both chess and investing. Also, the pain threshold is something that
is common in both things. In chess sometimes, you have situations where
there’s a game where you’re slowly being ground down and you have to either stick with
it and hope for the best or you act out. Sometimes acting out is not what is called
for, and sometimes it is, and you can develop a feel for when to do things like that. So there are certain similarities between
chess and investing definitely. Douglas Goldstein: We’re just about out
of time. We’ve been talking to Ilya Gurevich, who
is not only a fabulous chess player, but a world champion level chess player from a former
life before he came to Wall Street. Ilya, I want to thank you very much for sharing
with us some of your insights today. Ilya Gurevich: Doug, Thank you so much. Douglas Goldstein: Take care. Ilya Goldstein: You too. Bye-bye. Transcription of interview with Ilya Gurevich. Douglas Goldstein, CFP®, is the director
of Profile Investment Services and the host of the Goldstein on Gelt radio show (Monday
nights at 7:00 PM on www.israelnationalradio.com. He is a licensed financial professional both
in the U.S. and Israel. Securities offered through Portfolio Resources
Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services
LLC. Member NYSE/SIPC, a Fidelity Investments company. His book Building Wealth in Israel is available
in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788
or (03) 524-0942.

Leave a Reply

Your email address will not be published. Required fields are marked *