CBOE Origin Remembrances: Michael Greenbaum

By Lawrence G. McMillan

Editor’s note: trader and mathematician Michael Greenbaum is famous in the world of option trading as the firm he founded – O’Connor Associates – became synonymous with the highest level of derivative trading based on theoreticals and modeling. It eventually was a major player in nearly every form of derivatives arbitrage practiced on Wall Street.

The Untold Story of the CBOE's Good Fortune

by Michael Greenbaum

In late 1975 I was working on an encryption project for the Federal Government. I was in between some assignments and accompanied two friends to Chicago. My friends knew of my math background and urged me to visit their new jobs in Chicago. Both friends had always been in the securities industry and had ventured to Chicago for the new “game” called options. I had no securities industry background, but decided to see what this was all about.

My first day on the floor as a visitor was an epiphany. Whereas I saw that, for the most part, all of the market makers were trading on their gut instincts about the market's up and down gyrations, it was immediately obvious to me that the various call options were strictly mathematically related. I told my wife, in a phone call that first evening when I was in Chicago “I`ve died and gone to heaven”!

Continue reading the full article by clicking here.