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Sean Knudson ’13 carved out unprecedented role at options exchange

  • Sean Knudson '13 explains the procedures in a trading pit at the Chicago Board Options Exchange to members of Carthage's F...
    Sean Knudson '13 explains the procedures in a trading pit at the Chicago Board Options Exchange to members of Carthage's Finance and Investment Club. Sean continued on at CBOE after his internship ended.
    Carthage College

By Thomas Applegarth

April 05, 2013

Music graduate closes in on finance degree

Many times students had asked Russell Rhoads, an instructor with the education division of the Chicago Board Options Exchange, to intervene on their behalf in the exchange’s highly competitive internship process. Never did he feel compelled to say yes.

That changed when he met Sean Knudson ’13.

Sean was a student in the Options and Derivatives class that Mr. Rhoads taught at Carthage in spring 2012, and he inquired early and often about the internship at the CBOE division known as The Options Institute. The adjunct professor said he relented and recommended Sean based on his persistence, maturity, and understanding of the material.

After landing that prized internship, Sean spent the summer giving tours, helping with seminars, developing market strategies and writing blog posts. The experience solidified his plans to make his career in options, and he had no interest in putting the exchange in his rear-view mirror.

The problem was the CBOE had a longstanding policy not to hire employees directly from its pool of interns. As the largest options exchange in the U.S., it typically demands 3 to 5 years of work experience, Mr. Rhoads said. But this particular intern wore them down.

“He expressed a lot of enthusiasm and a desire to stick around,” Mr. Rhoads said. “We kind of created a spot for him.”

* * *

Wearing a blue trader’s jacket, Sean guided five visitors from Carthage’s Finance and Investment Club across the 40,000-square-foot CBOE trading floor. Along the way he detailed the history of the exchange the theories that fuel it, pausing to let a fact or dollar number set in.

In the electronic age, it’s one of the rare venues where face-to-face “open outcry” trading is still practiced. Sean helped his guests make sense of the chaos as traders exchanged shouts and hand signals in the pit just behind him. His comfort with the industry’s more colorful terms like “triple witching day” belies the fact he was once on track for a career reading treble clefs.

Attracted by the choral program’s strong reputation, Sean enrolled at Carthage in the fall of 2005 and dove eagerly into the music major. He performed with the Lincoln Chamber Singers, toured Europe twice with the Carthage Choir and played organ at both the Baccalaureate and the New Alumni Convocation.

After performing for the world, he discovered his true passion in the pages of The Wall Street Journal. Devouring it from cover to cover during down time in his job at Hedberg Library one summer, Sean acquired a taste for politics and securities trading.

“I’ve always had a mathematical bent,” he said. “The real-world practicality of finance, combined with mathematics, is what attracted me to that industry.”

Just a few months after graduating in 2010, Sean re-enrolled at Carthage to pursue a second major in finance. He never looked back, although he remains appreciative of the backing from Music Department faculty such as Professor Peter Dennee.

“They were very supportive, and I think that’s a testament to them,” Sean said. “They wanted me to do something that made me happy rather than do music and really question ‘What if’?”

He credits Carthage faculty like Joseph Wall, a longtime financial analyst and professional investor who chairs the Business Administration Department, for accelerating his learning curve in finance. One unique class unlocked the door to a promising profession.

* * *

Having developed a rapport with Mr. Rhoads, Prof. Wall saw an opportunity to bring some even more targeted expertise to the Options and Derivatives course he had taught twice before. The department chair began a light but persistent recruiting pitch.

Before joining The Options Institute in 2008 to teach everyone from financial professionals to government regulators, Mr. Rhoads spent years as an investment analyst and trader. He’s known as a foremost expert on the CBOE Volatility Index (VIX), a vital industry tool that projects the level of fluctuation in the options market.

Given the latitude to tailor the course to his knowledge, he agreed to come to Carthage. The textbook he wrote on the VIX was already the class standard.

“I got to develop the curriculum from scratch,” Mr. Rhoads said. “I wasn’t given an outline and a book.”

The result was another step toward the balance the Business Administration Department has worked hard to achieve. Prof. Wall said the College values its strong connection with CBOE. Jim Bittman, senior instructor and director of program development, spoke at Carthage in 2010 as a Chapman Executive-in-Residence.

“There’s a nice blend here where practitioners and academia meet, and this is a nice example of that,” Prof. Wall said.

Acknowledging that derivatives aren’t intuitive to everyone, Sean said they somehow came easily to him. Professors spotted his interest in that segment of the financial industry well before Mr. Rhoads arrived, and he leapt at the chance to dig deeper.

Sean Knudson is shown next to the name plate for The Options Institute, the division of CBOE where he worked. That experience paved the way for him to become a trader trainee intern at Group One Trading, LP.

“Most classes that deal specifically with derivatives are master’s-level classes,” Sean said. “To find it at an undergrad level is a unique experience.”

Mr. Rhoads said he was impressed by the options pricing calculator his pupil created using a spreadsheet. Thanks to a recommendation from the adjunct professor, Sean was among the 20 interns CBOE accepted. For 2 ½ months he commuted by train to the building on the south end of Chicago’s Loop.

Along with daily involvement in The Options Institute’s seminars and classes, he helped Mr. Rhoads write a paper laying out the market statistics on a gold volatility index. Because his experience in musical performance made him “largely immune to nervousness,” he said, his excitement took over.

As the internship wound down, he lobbied the CBOE to keep him around. Officials at the exchange made an exception and allowed him to work remotely on projects as he returned to Carthage for his final year. Mr. Rhoads said the impression Sean made at the exchange helped to cement the College’s reputation for future students.

“He definitely made Carthage look good,” Mr. Rhoads said. “Our experience with Sean should help them out.”

Sean’s work there paved the way for a new opportunity. He recently became a trader trainee intern at Group One Trading, LP, in Chicago.

That rapid rise makes his one of a number of success stories that the Options and Derivatives course has spawned. What another student learned helped him gain entry into graduate school at Harvard University, Prof. Wall said, while yet another member of the class earned a perfect score on a professional entry exam.

“Knowledge of subjects such as options and derivatives sets them apart from their peers,” Prof. Wall said, “and gets them into jobs that otherwise would be unavailable.”