Starting out in the financial markets

I came to my career choice the way many students do—trying a few things until something sticks. When I started college at the University of Chicago, I was interested in science and math, but wasn't really sure what to pursue. Eventually I decided that what actually interested me was using math to solve problems and, after some exposure to economics and finance, I realized that applying math to markets in a trading environment would be ideal. Getting instantaneous feedback about the decisions you make and being able to immediately apply that feedback, both cornerstones of working in the markets, really appealed to me.

Anxious to make my start in the real world, I graduated in December 1988 at the age of 20. That January, I joined a small market-making firm at the CBOE called LETCO and in October, I started in the Eurodollar options pit. I still remember with excitement walking into the pit with $100,000 of trading capital on that first day.

Every day, I stood in the pit from the 7:20 opening until the 2:00 closing bell, rarely taking a lunch break. I'd go home to my studio apartment and sit down in front of my Macintosh 512K, writing risk software in Pascal, experimenting with option pricing models, and studying historical Eurodollar futures data. I put a pillow on top of my Imagewriter II printer (dot matrix - anyone remember those?) so I could sleep while it noisily churned out option pricing sheets for the next day. It was in these early days that the approach my firm was founded on came together—combining technology, research and risk management to capture opportunities. It's the same approach we take today.

Within weeks, a mini-crash occurred and I lost $35,000 in a single day as I re-hedged a 50-lot of calls I had sold. Although gut wrenching at the time, I know now that it was the best way to start out. Failure is a great teacher, and it certainly fueled my determination. It was also an immediate education on the importance not only of risk management, but of always being open to seemingly unlikely market events. The lesson still holds true, and it prepared me for the volatility and market dislocations that are increasingly part of this business.

Would I make the same decision if I had to do it all over again? Yes. I've been fortunate to witness firsthand many historic market events and debate countless industry issues in my career. The market events and topics of our present environment are some of the most interesting—and offer some of the greatest opportunities—yet.