Using the IBKR Student Trading Lab at the University College London (UCL)

Study Notes:

An interview with Dr. George Namur

Q: Can you tell us a little about your role at University College London (UCL)?

I’m an associate professor of education at UCL [University College London] School of Management in finance, and I’m also the director of the MSc Finance program at the School of Management.

Q: How long have you been participating in the IBKR Student Trading Lab, and what attracted you to it?

I came across the ‘Trading Lab’ at Interactive Brokers about 11 years ago, and it immediately occurred to me that that would be an excellent addition to the course that I was designing.

Q: Can you tell us about your course and how you use IBKR’s tools to help you achieve your learning objectives?

I teach a course called ‘Hedge Fund Strategies’. It attracts a lot of ambitious students; so, most of our students end up signing up for this course even though it’s an elective. Right now, I have about 125 students. A lot of them have not necessarily worked in the business, but they’re all graduate students right now.

We discuss a great deal the strategies that different hedge fund managers use to try to generate profits for themselves and their limited partners. But equally as important for me, it’s important for students to develop a fluency in everything that is financial markets and to develop a hands-on experience in what it’s like to be in the market. So, beyond theoretical topics that are taught, I want them to feel what it’s like to be in the markets … live the markets … with the ups and the downs, and the tracking the profit and loss, of getting the sense of the extent to which volatility could affect their performance.

To make it even more real, hopefully [they] develop the typical emotions that come with being in the market – from being excited – almost euphoric on the one end – to being scared and concerned on the other, and the IBKR platform basically makes things real.

Q: What are some of the tools that the students use, and how much do they interact with them?

My students tend to check the platform all the time. They want to see how their investments are panning out. On volatile days, they check them probably a little bit more often than normal, but they are engaged, and they want to see how everything moves at the same time. It adds this level of reality to the experience that cannot be communicated simply by lecturing them.

I can think of lots of tools that they used …. the Probability Lab … the Risk Navigator that gave them a very good sense of risk management – and not just of risk measurement. It allowed them to look forward and replicate what a real-life risk manager would do in terms of not only, let’s say, measuring the VAR of the portfolio, or deciding where stop losses should be, but also asking the hard questions that begin with: What if? What if you’re wrong? What if this happens? What if that happens?

Q: What are some of the benefits you’ve experienced or observed since becoming a participant in the IBKR Student Trading Lab?

A lot of [student groups performing as] funds went from being a little bit tentative, and sometimes even haphazard in the way they would put on positions to developing a discipline about sizing, about working orders— how to put it in and how to get out. They became a lot more sophisticated in setting up the stop losses.

A lot of stories are absolutely remarkable, and I keep marveling at the fact that this all works in part – as finding your way … making your way … within the complexity of markets and the complexity and sophistication of IBKR’s TWS.

I can think of students of mine … who took the course … of probably not having very specific expectations early on, but then moving on to basically pursuing a dream of working for a hedge fund and having their dream come true. I think what helped them the most was how credible they were when A) they asked for an interview with the hedge fund manager and B) how credible they sounded when they went for the interview.

I would say hedge fund strategies would not be the same if it were not for the use of IBKR’s TWS platform in class.

We are not the only university that has a course on hedge funds, but we are the only one, as far as I know, that actually incorporates the real-life portfolio management as part of the curriculum; and because we use IBKR, students develop a feeling for things that no amount of lecturing would explain.

Let’s say at the times of important news announcements – let’s say non-farm payrolls or an FOMC meeting – they would develop a sense of how quickly the P&L will rise and fall and go back and forth between positive and negative. Unless they do that, unless they have the platform, unless they have positions that are being marked-to-market, they would not know that. Sure, they would understand the concept of what managed futures are … they may even think up ways to develop a portfolio that way, but they wouldn’t know what it feels like. And so, that system that they have from IBKR that tells them – maybe you have great ideas, but maybe your sizing is a bit excessive. Maybe this is more risk than you should – unless they do that.

Same thing: the impact of changes in implied volatility on options that they hold, especially for funds that use a lot of options. Even if you fully understand the concept of implied volatility changing when uncertainty rises or falls, you will not have that expertise. You will not have that conviction and self-confidence when you go, let’s say, on an interview for a job to speak about that, because you would only have read it in a book, and that’s not the same thing.

Q: Would you recommend the IBKR Student Trading Lab to other educators?

My advice to faculty members … to professors that teach finance things related to markets … whether it’s derivatives, or anything related to funds, or just a trading-focused course, is to incorporate IBKR into the education. That reality dimension … once you put it into the course … into the academic experience, it elevates it. It makes it a lot more credible, and it gives students a sense that what they’re studying is real, right? It’s not theoretical. it’s something they could use.

I would also encourage professors of finance, and directors of finance programs, to consider running trading competitions using the IBKR platform, because it allows students to try their hands at markets in a relatively safe way. And the one thing that has always pleasantly surprised me is – despite the fact that we are only talking about paper accounts here – It’s amazing how real it feels to students. You don’t get students saying, ‘Well, it’s paper money anyway. Why should I be too concerned, or too afraid, or too happy?’ It’s amazing – it feels real to them, and it engages them, and it forces them to keep up with the news in ways that maybe they would not otherwise. So, I think everyone who teaches anything along these lines should consider using IBKR.

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