Rice students win Commodity Trading Challenge

A team of four Rice University students last weekend won the CME Group Commodity Trading Challenge – a national competition they entered for fun without any experience buying and selling commodities.

Wiess juniors Conor Loftis, Jordan Hmaidan and Dylan Bradley and Sid Richardson junior Aneesh Mehta outperformed 167 other teams from more than 80 colleges and universities during four weeks of simulated trading of crude oil and gold futures.

When the competition began Feb. 16, each team was given an account balance of $100,000. Two weeks later, the Rice team had the highest account balance — $285,000 –- which qualified them to enter the final round with the other top 15 teams.

Account balances were reset to $250,000, and after another two weeks of trading, the Rice team’s $788,740 –- about a 215  percent return – easily trumped the second-place winner from Sweden’s Lund University, whose final balance was $475,510.

“It was a very exciting time to trade oil,” Hmaidan said. “We began the tournament before the events in Libya unfolded, when a barrel of crude oil cost less than $88. Over the next week, the price jumped to $107 and we profited from our long position. In the finals, the tsunami in Japan caused the price to drop as a low as $96 before rising back above $101.”

Hmaidan, an economics and managerial studies major, learned about the competition from a listserv for social science majors and told his roommate, Loftis, who is majoring in math and economics. They formed a team by recruiting Mehta, a math and film major who is passionate about trading, and Bradley, an economics major who is knowledgeable about the markets.

Initially members of the team placed their trades from three different laptops, but Loftis said they soon realized it would be more productive to trade on only one laptop at a time. “We did well at first by luck, but we needed a coherent strategy,” he said.

The team brought a laptop to lunch and dinner and just about everywhere else they went so they could monitor the oil markets. “The price could fluctuate as much as $3 in one day,” Loftis said. “We decided we would trade in only one direction. Sometimes it worked and sometimes we took some pretty big losses.” He estimated that toward the end of the competition, the team was trading for four or five hours each day.

“We made a lot of money trying to profit off the market’s overreaction to what was happening in Japan,” Loftis said. “The market overreacted by going too low, and our strategy was that it was going to come back up.

“It really was fun, and we learned there’s a lot of potential to make money selling commodities,” Loftis said. “I don’t know that much about stocks. Oil is a lot more volatile. The price of oil is strongly affected by political events. Turmoil in the Middle East will shoot prices up.”

For their first-place success, the team received $2,000 and a chance to interview for an internship on the New York trading floor of competition sponsor CME Group, one of the world’s leading and most diverse derivatives marketplaces.

The CME Group Commodity Trading Challenge also includes an open-outcry trading competition that will be held April 9 at the University of Houston, where individuals can experience yelling and selling on a simulated trade floor. Mehta and Loftis plan to enter the competition; Bradley and Hmaidan will be competing elsewhere that day – in the Clyde Littlefield Texas Relays in Austin as members of the Owls track and field team.

	From left, Aneesh Mehta, Conor Loftis, Dylan Bradley and Jordan Hmaidan won first place in the 2011 CME Group Commodities Trading Challenge.