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How 3 College Students Turned $500K Into $2.6 Million In 4 Weeks

PM, C.PM | December 9, 2017

If you were given a portfolio of $500,000 and three months to gain as much as possible in four weeks, what would you do?

Three students at CUNY Queens College used aggressive options strategies during earnings season. Senior economics and finance major Max Fruchter, junior accounting major Shlomo Sandler and junior applied physics major Daniel Baruch turned the initial amount into $2,636,000, good for a gain of 427 percent.

The returns were enough for the students to win the fourth annual thinkorswim Challenge by TD Ameritrade, a trading competition that allows college students to team up and compete for the most returns using paper money.

Baruch, the applied physics major, said at the beginning of each week he would look at the earnings schedule and try to interpret out who would beat and miss — and how much the stocks would move as a result.

The team would then put on an option spread, like strangles, to maximize potential return. Teams were not allowed to invest more than 10 percent of their total capital into a single name, forcing them to diversify.

“We had to take on a lot of risk if we wanted the returns we wanted,” Baruch said.

That backfired occasionally, with the team taking losses in stocks like Advanced Micro Devices, Inc. (NASDAQ: AMD) and Facebook, Inc. (NASDAQ: FB). But they also had winning trades in stocks like Twitter Inc (NYSE: TWTR) and Philip Morris International Inc (NYSE: PM), thanks to their use of far out out-of-the-money calls. They made almost $1 million on the last day of the competition.

The students from Queens College beat out 930 other teams in the competition, including second-place Columbia University by $1.3 million.

They were each awarded $3,000 via a TD Ameritrade brokerage account. Queens College was also awarded $30,000 as a result.

According to TD Ameritrade, 38,600 trades were made during the four-week competition, 77 percent of which were options trades and 41 percent of which were made on a mobile device. The five most commonly traded stocks were Tesla Motors Inc (NASDAQ: TSLA), Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN), Netflix Inc (NASDAQ: NFLX) and NVIDIA Corporation (NASDAQ: NVDA).