What led you to become a trader? I was a caddy for some grain traders when I was in high school. In college, a friend of mine asked me if I
would like to be a broker. I thought that he meant doing the same thing as the guys I had caddied for. So, I said,
"Yes. Great! Where?" "Indianapolis," he answered. I said, "What exchange is in Indianapolis?" "None," he said, "you
do it on the phone." I had this impression of: "Hello New York, buy; Chicago, sell." When I got there, I found out I
was a salesman.
After a few months, I asked the guys in the office, "Who makes all the money in this business?" They said you
have to be on the floor. Right there I decided to go to the Chicago Board Options Exchange. On the floor, I met one of
the traders I had caddied for years ago, and he grubstaked me with $50,000.
Isn't that unusual, giving $50,000 to a kid who used to caddy for you? It was, except that he was very wealthy and needed to get off the floor because of his high blood pressure.
He owned a seat that he had bought for only $10,000, and just needed the ability to trade in a customer account. I
was going to help him do that.
What made him think you could make it as a trader? He had heard some rumors around the floor that I was a hotshot clerk, and he basically took a chance on me.
What happened? I went from $50,000 to about $75,000 in the first two weeks. I had put on all these
volatility spreads [an option position that will gain if the market becomes more volatile] and they were getting pumped up.
Did you think, "Boy, this is easy"? I thought, "This is it!" I mean, I was a genius. But what I was really doing was taking the opposite side of
positions the other brokers were liquidating, letting them out of the market with their profits, while I was left holding
the bag. This was spring 1979 and implied volatilities were very high because 1978 was a very volatile year. Well, the
market went nowhere, and the volatility and option premiums collapsed. Within six weeks I had lost almost
everything. The original $50,000 was down to only about $15,000.1 was feeling suicidal. Do you remember the big
DC10 crash at O'Hare in May 1979, when all those people died? That was when I hit bottom.
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