Reading about how the most successful options traders, like Edward Thorp, with his unmatched 20% annual return over three decades, have interpreted the markets can offer valuable insights to anyone in this sector. This article will tell you about the stories of Warren Buffett, who employs cash-secured puts, alongside innovators like Tom Sosnoff, John Arnold, and Guy Saidenberg. Who is the best option trader in the world? We have an idea, and we’ll tell you more about it in this text. We’ll also share a couple of interesting readings if you are interested to learn more on the topic.
Key takeaways
- Edward Thorp was likely the best option trader in the world, with a 20% annual return for 30 years.
- Warren Buffett is also among the most successful options traders, using a cash-secured put strategy to generate income. However, Buffett’s focus is mostly on buy-and- hold stock investing.
- Other notable successful options traders include Tom Sosnoff, John Arnold, and Guy Saidenberg.
The Most Successful Options Traders in the World
So, who are the most successful options traders in the world? While it’s really to easy to find information about the most popular stock traders, finding specific information about options traders can be a bit more challenging.
Here is a table including five names you should know about when it comes to the most successful options traders:
Edward Thorp
While it’s hard to make a ranking, it is possible that our top choice for the most successful options traders would be Edward Thorp. Known for revolutionizing gambling with his card-counting techniques (if you’re a blackjack fan, you’re probably familiar with his strategy), Thorp also mastered the options trading market, achieving an astounding 20% annual return over 30 years. This feat places him among the most successful option traders in the world, if not the best option trader in the world.
Thorp’s secret to consistent profits in options trading is in his mathematical skills and understanding of probabilities. Thorp mentioned that the application of similar analytical rigor to the financial markets helped him identify mispriced assets where the odds were in his favor. He utilized the Kelly criterion to balance the trade-off between risk and return, ensuring that his investments were always optimized for the best possible outcome without overexposing himself to risk.
His approach to betting—whether at the blackjack table or on Wall Street—was always informed by hard data and mathematical models. This methodical approach set him apart from other traders and investors who often rely on gut feelings or market trends. Thorp’s discipline in sticking to his quantitative strategies, regardless of market conditions, underpins his success and longevity in the highly volatile arena of options trading.
For readers looking to understand what it takes to be among the most successful options traders in the world, Thorp’s career often relied on the power of mathematics, rigorous analysis, and strategic risk management. His story emphasizes that, with the right approach, it’s possible to beat the market and consistently achieve remarkable returns over time.
Warren Buffett
While most people generally associate Warren Buffett with traditional investments in stocks and real estate, few are aware that he is also among the most successful options traders. Yes, the Oracle of Omaha applies strategies in the options market that many wouldn’t expect from a man of his investment philosophy. A prime example of this is his use of cash-secured puts to lower the cost of stock purchases.
If you’re eyeing a stock at a favorable price, the usual strategy would involve analyzing trends and setting a limit order based on your findings. However, Buffett’s approach often relies on cash-secured puts. This technique basically requires selling put options (such as those that you may find on our options screener) at a desired bottom price and collecting premiums upfront. If the option gets exercised, the acquisition cost for the stock then becomes the strike price minus the option premium.
Let us give you an example of how Warren Buffett’s used options to earn a profit in the past with Coca-Cola back in 1993. In this deal, Buffett, having been a significant shareholder since 1988, sold 5 million put options at a strike price reflecting his target purchase price, netting him $7.5 million in premiums. The stock never dipped to trigger a purchase, and the strategy allowed him to profit from the premiums.
He did something similar in 2008, during the financial crisis. While most investors were facing massive losses, Buffett’s use of cash-secured puts gave him a premium income of $4.9 billion.
Tom Sosnoff
Another name to include in our most successful options traders list is Tom Sosnoff. His contribution to the online brokerage industry is easy to demonstrate online, with an emphasis innovation and financial education for all investor levels. Through his co-hosting of tastylive LIVE!, airing on the tastylive network, he shares insights into the options market daily.
Starting as a former floor trader, Sosnoff created Thinkorswim, an options-trading platform that became a game changer. This innovation, which was later acquired by TD Ameritrade for $750 million, is perhaps his most significant achievement in the trading industry.
His background as a Market Maker for the Chicago Board Options Exchange (CBOE) and as one of the OEX traders in the S&P 100 Index pit provided him with over two decades of hands-on experience. With this expertise, Sosnoff set himself as a target to help others achieve financial independence through options trading.
Tom Sosnoff co-founded tastylive in 2011, a platform designed to provide education for its users alongside trading opportunities. Building on the principles established by Tastylive, TastyWorks was introduced in 2017, with Scott Sheridan assuming the role of CEO (later changed to Tasty Trade). These companies emulate the success they had with TOS in the past.
John Arnold
Options traders do not need to be specifically focused on using stocks as an underlying asset, as demonstrated by John Arnold, one of the most successful options traders, particularly known for his trades in the energy sector. Arnold’s approach to options trading, with a keen focus on energy commodities, largely differentiates his experience from that of the traders mentioned above.
After finishing college, Arnold started working at Enron as an energy analyst. He quickly shifted to trading crude oil and then to natural gas, which became his main focus. Arnold was very successful, making a lot of money for the company. In just one year, he made $750 million in profits, earning himself an $8 million bonus.
Arnold made his mark as a master of energy trading by leveraging options and futures to exploit the volatility within the energy markets. While specific details of his options trading activities are closely guarded, his reputation and success stories circulate among those in the know and on many specialized websites.
From this point of view, his strategic moves within the energy sector represent a broader lesson for options traders everywhere: success isn’t confined to the stock market. In fact, if you understand how energy prices work, you may spot a lot of opportunities in this sector.
Geopolitical factors and simple shifts in the supply-demand balance can create situations where an energy commodity is just not correctly priced. Trades like Arnold can exploit these windows of opportunity, making for a profitable investment.
Guy Saidenberg
The last name we should mention in this article on the most successful options traders is Guy Saidenberg, an industry veteran whose vast experience encompasses running global divisions at leading investment banks to advising platform businesses as an angel investor. His tenure as Global Co-Head of Markets at Barclays since 2017 and his recent appointment as Group CFO for Kevin Speed’s team highlight his significant influence in the financial industry.
Before joining Barclays, Saidenberg dedicated 17 years at Goldman Sachs, where he led multiple departments including Emerging Markets, FX, Commodities, Sales Stats, and the Securities Division Digital Strategy, which all heavily relied on options trading. His comprehensive background, combined with a PhD in Financial Economics from the University of Chicago, positions him as an important figure in global finance.
Saidenberg’s career trajectory mixes academic excellence and practical expertise, and many sources mention him as one of the most successful option traders globally. His strategic foresight has not only led to his personal success but has also contributed to the evolution of the trading landscape.
For readers looking into who is the best option trader in the world or seeking guidance from the most successful options traders in the world, Guy Saidenberg’s story offers both inspiration and a blueprint for success.
Who Is the Best Option Trader in World?
Looking at these five successful stories of options traders, it’s clear that defining the “best” in this category is subjective. However, based on his impressive track record and pioneering contributions to the field, one could argue that Edward Thorp seems to have a slight edge over the other most successful options traders.
Of course, there are other notable names such as Warren Buffett who have achieved remarkable success in their investments but may not solely focus on options trading. Ultimately, what sets these individuals apart is their unique approach and expertise in the financial industry, proving that there is no single formula for success in options trading.
Further Reading
In case you are interested in learning more about successful options traders, we have two books you may want to add to your reading list:
- “Beat the Dealer” by Edward O. Thorp – This classic book by Thorp explores his card-counting system for blackjack, but it’s also a testament to the analytical skills he applied later in options trading. It offers insights into probability and risk management that can be adapted for financial markets.
- “The Essays of Warren Buffett: Lessons for Corporate America” by Lawrence Cunningham – While not solely focused on options trading, this collection of Buffett’s writings gives insights into his thoughts on investment strategies, including his occasional forays into options trading.
