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Traders at Chicago Board Options Exchange

Traders {format} 15:29 Larry Massett

Options bought and sold for fun and profit.

Broadcast: Apr 26 2005 on WBEZ Chicago Matters Subjects: Business


by Larry Massett

INTRO, Larry Massett: Everyone knows Chicago is one of the world’s financial meccas, home to the Chicago Board of Trade, the Chicago Mercantile Exchange, the Chicago Board of Options. A lot of money is made and lost here every day. We tend of think of this as an impersonal activity: we picture hordes of faceless traders dashing around the floor of an exchange, we see the long columns of numbers in the newspapers every day. These numbers are reported in print so tiny it makes the ups and downs of money look like the adventures of ants. It seems reasonable to conclude that no actual people are involved in the game of money. It’s all done by statistics.

The truth is, money is highly personal. You can ask your friends about their health, their happiness, and even about their love lives; but you can’t ask how much money they have. That’s taboo. There are too many hopes and fears attached to money, too many dreams, too many nightmares. We can’t talk about it openly. We can, however, fantasize...

(Music, amb...)

Sue: Would you like some cake?


Herb: We better do cake in a little while..

Sue: Okay, you’re happy then, okay. Do you want your cake now?

John: Not yet.

Sue. Okay. All right, let’s talk about vega. There’s vega,, gamma, vega —

Herb: Theta —

Sue. Theta, rho...

John: Butterflies.

Herb: Tiger cones —

John: Collars, um —

Sue: Oh I like reversals and conversions myself

John Reversals, conversions, jelly rolls —

Sue Boxes —

John Boxes, Pterodactyls. And, uh —

Sue — What is a tera —

John: — And an albatross.

Sue.. Oh, my god....


Massett: This is not the Mad Hatter’s Tea Party. These are four perfectly respectable Chicago citizens getting together for a little cake and a little chat about their common obsession, which happens to be: trading options.

Herb: I’m Herbert Schmidts, I live in Roselle, and I’m a computer programer.

Sue: I’m Sue Kleinman, I live in Evanston, Illinois, and my full — time career is insurance planing.

John: My name is John Knot, I live in Lakeview, and I’m a full — time professional trader.

Andrea: My name is Andrea Kirschenbaum, I live in Northbrook, and I trade as a part — time pastime. Massett: An option gives you the right to buy or sell something — a stock, let’s say — for less money than if you owned the stock itself. Options have been around since the ancient Greeks, but trading in them wasn’t standardized till the Chicago Board of Options opened in the l970’s. Nowadays, anyone can play.

Herb: Just kinda got bit by the bug, you know, something in the mail or something like that. And then a friend said “Well, I heard about this something — or — other. “ So it just kind of took off that way.

Sue: I just happened to be driving along one day and heard this ad for one of these evening introductions to one of the many options courses that exist in the universe. Went to the meeting, was very intrigued, because it’s presented as “You can just go out and spend a couple days in a course and become a millionaire!” Which cynically I knew was not true but there was still something about it that was appealing to me. So I went and I’ve stuck with it because I really believe there’s opportunity there if you’re willing to invest the time to do the learning. It’s not easy. It’s very complicated. But it’s kinda fun, actually..

Massett: Sue and Andrea spend five to ten hours a week trading from home by computer. Herb devotes at least one full day a week to it and John, of course, is full — time. What’s hardest for them is not the technique, although you can tell by jargon — the “gammas,” “deltas,” “collars,” “butterflies,” “boxes,” and all that — you can tell it’s no piece of cake. But you can get on top of trading strategies. The big question is whether you can get on top of yourself.

Sue: I think it’s easier said than done, because Andrea and I trade together in this learning process and we’ve been doing the exact same trades. We had this trade on and we had the rules: when it reaches this point, we’re making the adjustment, the day it reaches this point. So we’re sitting there going “Well, what do you think? Do you think we should do it? Do you think we should wait for tomorrow? It’ll probably come back tomorrow. “ We did everything you’re not supposed to do. We were lucky that the trade kind of worked out for us, but looking back...I’m chuckling, we had all the rules, we had “this is our adjustment point and we’re going to be rigorous about it” and when push came to shove, we went “Naaaah, wellll, let’s give it it another day — ”

Andrea: It’ll go back —

Sue: It’ll come back....

John: Hard work and discipline. If I see somebody that works hard and has discipline, I think the odds of them being successful is high at anything they do, and especially with options trading. The type of person that can quit smoking...that can stay on a diet...that can balance her checkbook. Susie’s three for three.


Massett: Self — discipline has always been the hardest part of trading. That’s no easier now than it was a hundred years ago. But everything else is easier now. The technology really is... a piece of cake . You feel the urge to buy some options? Hey, just waltz over to the nearest computer and hit a button.

John: The nice thing about the internet is you can get internet over satellite now —

Herb: — yeah —

John: — so you can basically be —

Herb: — in the desert —

John: — in the middle of the desert. You have a couple solar panels to power the thing and you’re good to go.

Herb: Yeah. That’s the wave of the future. It’s getting so nice now and so accurate people can literally trade from a yacht in the middle of the ocean. And it used to be expensive and now it’s dirt cheap.

Massett: For years Sue Fineman has been leading bicycle tours through the south of France in the summer. Suddenly it occurs to everyone they could combine travel with trading. They could start a business called “Adventure Options Travel,” or “AOT”

Laughter, everyone talking at once:

“We could start it —

It could be a business —

Yeah, yeah, business —

You could be on an African safari —

We better hurry up and trademark that —

Bring your laptop —

You could have an education and travel — .

We could do this (etc..)”

(Wistful romantic music up, then under...)

Andrea: I have a friend who goes on cruises and her career , I suppose you’d call it, she sells prearranged funerals. So she goes on these tours that cater to seniors — I’m serious — and she’s paid to do it, she speaks on these cruises to these elderly people and gets them to do prearranged funerals.

Sue. I could do that...

Andrea. You see? There’s all kinds of ways to make money....


Sue: I think people today, what I’m noticing about friends in my age group — I’m in my later fifties — is people are so burned out. Five, ten years ago everybody was out there trying so hard to make nine million dollars a year , and they weren’t enjoying themselves while they were doing it, and they are scaling back and looking for alternatives —

Andrea — Alternatives, yeah...

Massett: And what is the point of having money anyway? Nobody here seems to be rich — not yet, anyway — but if they were, what then?

Herb: Independence, more than anything. I’m looking for some type of financial independence. I mean, I’ve got a million things I want to do, and working the 80 hours a week plus is kinda putting a cramp in my style. And if I can just ease up the pressure a certain amount — it doesn’t even have to be a hundred percent — just give me a little more time to spend with the people that are important in my life and the things I want to get done.

Sue: I concur, I think freedom — I would love to be able to give money away. I would like to be a junior Oprah.


I would. I would love to — — ‘cause I don’t need a lot, I really don’t. But I would love to be able to give away 20 thousand here, 30 thousand there, to the charities I believe in. I think that would be an awesome way to live.

So it’s really not about ching — ching, ching — ching. Money in and of itself is nothing. Money allows to you to have — not to have, but to give, to enjoy certain things in life. But it’s not

You know, I’m so good at losing it, it can’t possibly be about money.


But is is freedom. Freedom and independence is huge.

Massett: Yeah, says Andrea, independence is good , and so is giving to charity, yeah..but:

Andrea: Yeah, but I like money. I like to spend money, I guess I don’t live as simply as Susan does. I like a lot of things...

Sue: (talking over her) I’m so simple.

Andrea: ...but basically I think I need to know I can be successful at this for myself. I need that, to know that I accomplished it. So I will not give up. Because if I do it will be like saying, “ah, forget it.” And I don’t want to do that. I know I can do it. And I’m gonna do it.

John: An options trader needs to have that mental toughness to really find out what theyre trying to do and who they are. I’ve always said, If you really want to find out who you are: trade.

It’s not like a doctor where you say I want to heal people, or I’m a teacher, I want to teach children to read. An options trader is almost a greedy aspiration where you just want to make money. But there’s more to it than that. There’s something going on inside your head where you try to find out what you want out of life. Because to say that you just want to make money is not the answer. You’re gonna have a lot of pain, you’re going to work really hard, you’re going to go have a lot of emotional stress and you’re gonna want to want to know why you’re doing that. You’ll find that traders are very philosophical people. Hahahaha.....


John: People look at traders as these materialistic people that have no value to society. But in reality they are able to earn a living, and the money is redistributed to restaurants and charities and whatever. You’re not hurting society. You’re not doing anything dangerous, you’re not ruining people’s lives.

I’m not stealing Susie’s promotion at work and lying about her so I can get that promotion instead of her. And they end up firing her, because they only needed one of us, and I lied about her to get that job. So now Susie’s unemployed and she can’t make her house payments and she can’t feed her dog, and I’m happy cause I did what I had to do to get the job.

Andrea: Good point.

John: When you live in the rat race, in the big city, it’s a fact of life everybody can’t live the good life, and those who do, do so at the expense of others. And the nice thing about this is you can have financial independence and you sleep at night. You don’t have to worry about any lives you’ve ruined to get this happiness. And that’s an interesting way to think about it.

Andrea: Yes it is.

Sue: That’s cool... I like that....would you like some chocolate cake?

(Music...and out)

HOST: There’s an old Wall Street story about two brokers strolling down a sidewalk. All of sudden they notice a hundred dollar bill lying in the gutter. One of them starts to pick it up, but his friend stops him.

“Don’t bother, “ he says, “leave it alone. It’s counterfeit.”

“It is?” the first broker asks. “How can you tell?”

“Common sense,” his friend answers. “If it were real, somebody would already have picked it up.”

The two gentlemen in the joke represent the two poles of optimism and pessimism about money. Optimists are always hoping to find free money some way or another, and they’re always dreaming about what they’ll do with it. To them, money is a friend. To pessimists, money is an enemy, the root of all evil. If you have any, you’ll probably lose it very quickly , and if you don't you’ll certainly do bad things with it. That’s just the way money is...

(INTO BILLY HOLIDAY: "God Bless the Child")

Our story about options traders was produced by Larry Massett of The audio engineer was Jonathan Menjavir.