Prices edged lower this week, as the bulls are still reeling from the failed upside breakout that took place in February. After the breakout (whether you consider it to be over resistance at 4100 or whether you consider it to be the blue triangle in Figure 1), prices have pulled back below the apex of that triangle and volatility seems to be slowing down at least on a closing basis.
I would highly encourage anyone who is going to read this article of Joe Doherty’s recollections, to first read the article by Joe Sullivan. Joe Doherty was extremely instrumental in the creation of the CBOE, for he worked right along with Joe Sullivan as the process inched forward for four years before the exchange was born. These are some recollections that Joe D has of those years and the ones that immediately followed.
The CBOE’s first President, Joe Sullivan, was “everything” to the creation of the CBOE. In this article, written by Joe himself, the inner workings of politics – both in Washington and in Chicago – exchanges, and traders, all combined to make for a very interesting four years of legwork needed to start the CBOE. Joe did a tremendous amount of soothing, cajoling, and arm-twisting (I’m sure) to get the CBOE off the ground. He served as the inaugural president of the CBOE from its founding in 1973 until 1979.
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.
I met Mike Gallagher shortly after I joined Thomson McKinnon Auchincloss Kohlmeyer (TMAK) in 1976. Mike ran the Thomson operation on the floor of the CBOE at the time. Later, as I progressed to trading the TMAK arbitrage and option proprietary accounts, Mike and his partners were our main floor brokers on the CBOE. I talked to Mike recently, and asked him about some of the early days at the CBOE
Bear markets are tricky, and if what we are seeing now is the continuation of the bear market, it is exhibiting some of the actions that are designed to fool most of the people most of the time.
I met David Lucterhand when we were both freshmen living on the same floor in the H-1 Dorm at Purdue in the fall of 1964. A few years later, on my first visit to the CBOE – in November of 1974 – I was on the small trading floor in the old smoking room. To my surprise, there was David Lucterhand, making markets on the CBOE. I called David this week to get some of his remembrances of the early days:
The following is a remembrance of the early days of listed option trading, written by my good friend, who was an arb at Paine Webber.
In February of 1974, I finished my four-year hitch in the Air Force and was able to parlay my degree in math into a position in the Arbitrage Department at PaineWebber, which was looking to add options trading to their risk arb and convertible bond efforts.
I had been trading over-the-counter options for some time, ever since having read the book “Beat The Market,” by Edward Thorp (yes, the same guy who originally figured out how to properly count cards in blackjack and had also written “Beat The Dealer.”) Sometime in mid-1973, my broker Ron Dilks, called me and said that he had read an article in Business Week about listed stock options. It was about the Chicago Board Option Exchange (CBOE), which had begun trading listed options a few months earlier, in April of 1973.
