Investing Lessons from a 24 Year Options Floor Veteran

Over the last several evenings I have had the opportunity to spend time with a former Options Market Maker and Floor Specialist, who traded on the floor of the Philadelphia options exchange for over 24 years.

The purpose of my visit was research for a possible defensive strategy which our firm has been pursuing for some time.  During my visit with the floor trader, I jotted down notes of interesting experiences he explained to share them here in an effort to bring valuable living experiences from a 24 year options floor veteran.

“Everything Happens”

If it can happen it probably will, according to this gentleman. Interestingly we stated the exact phrase, in our First Quarter 2010 Newsletter (pg 5). Bottom line, be prepared.

“Sell Hope”

Hope is not an investment strategy according to this specialist, and if you find yourself in a position of hoping something works to make your investment successful, it is time to sell.

“Bottoms and Tops are impossible to pick”

No one can consistently pick the bottom and top of markets and there are plenty of opportunities in the middle according to this market maker.

“Being Dead Wrong, but not losing a ton is most pleasurable”

Options offer unlimited risk under certain contract obligations, but the reason I found this quote interesting was our parallel preaching of diversification and risk control.

“Models are just that, theoretical prices”

Investing is a very inexact science, models give investment professionals a hard and fast theoretical price, but our trader cautioned, the prices are just that, “Theoretical”

My shortened notes, probably do not do his interesting and entertaining stories justice, but I found great similarities in his experiences and our thoughts concerning investing, even though we are in two dramatically different areas of the capital markets.

Have a Great Day!


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