This past week I had the opportunity to be a guest lecturer at my college alma mater for an upper level finance class on options and futures.
As I was speaking to the group, a mix of juniors and seniors, I was able to reflect on my 30-year journey that started right where they were sitting.
It’s been an interesting and fun ride, and one you could learn from. So, while there is always something in the news that I could touch on, or an interesting insight into the world of income that I can share with you, today I want to step off the rat wheel for a minute and just chat. I want to share how I got to where I am today. Maybe my journey can inspire you. Let’s see…
I didn’t graduate college with a job. I certainly tried but was unsuccessful. Rather, I came home after graduation and spent those first few months back in my old room at mom and dad’s house in New York.
I wasn’t happy about it. I love my parents, but I was ambitious. I was 22 years old with his sights set on Wall Street. I was hungry to land any kind of finance job just get a foot in the door. I walked the streets of downtown Manhattan for weeks, dropping off resumes, meeting with headhunters, making cold calls. Finally, I landed a job at Cantor Fitzgerald, one of the world’s premier government bond brokers. They had an office on the 105th floor of the World Trade Center, Tower #1.
I was only there for a few months, sitting on their short-term treasury desk, but I learned that matching buyers and seller of 2-year to 10-year T-bills was not something that excited me. So, I moved on.
I was heartbroken to learn 12 years later that Cantor Fitzgerald would be the worst hit by 9/11, suffering a devastating blow to the company. Although I was over a decade removed from the firm, it still felt like a part of me had died that fateful day.
After Cantor Fitzgerald, I took a stock broker’s assistant job at Shearson Lehman Hutton, which later became Lehman Brothers and brought the financial world to its knees in 2008.
My job was to help new clients fill out brokerage applications, answer phone calls, and give out stock quotes on the phone. It’s hard to believe nowadays, but before the internet, customers would call on the phone to see what price IBM was trading for. I would type in the symbol on the Quotron machine to get the quote. Ha! How times have changed.
Still, I wanted more. I know you know that feeling.
Entering “The Pit”
Although learning the ins and outs of buying and selling government bonds and stocks during my first two jobs were a nice introduction to the financial world, nothing would come even remotely close to what I learned over the next seven years in the commodity pits of the New York Mercantile Exchange.
Talk about learning to sink or swim!
The “NYMEX” was home of the trading pits to options and futures contracts for energy products such as crude oil, unleaded gasoline, heating oil, and natural gas.
The day that my friend, who was currently a market-maker in the heating oil options pit, gave me a tour of the exchange, was the day I knew that this was where I needed to be.
Even though I had no clue what those guys in brightly colored jackets were doing while screaming and yelling and frantically waving their hands, I knew I wanted to be a part of it.
It was loud, confusing, energetic, fascinating, and I could feel the money flowing.
Lucky for me, it turned out I was in the right spot at the right time because my friend introduced me to a small firm that was looking to hire a clerk for their trading operation.
The firm was controlled by a very wealthy individual with a home operation in Chicago and they wanted to expand to New York. I was going to be the fourth man in this new operation that consisted of a head options trader, a head futures trader, and a head clerk. I was to be the second clerk.
The learning curve was fast and stressful. Their goal and mine was to turn me into an options trader. The sooner, the better. After just one year as a clerk, they put me in the pit as a trader! As a 25-year old, I took control of millions of dollars’ worth of energy futures and options and would enjoy a 50/50 profit split with my boss.
Of course, my first day in the pit didn’t go exactly as planned…
What It Means To Be “Fresh Meat”
I was still practically wet behind the ears and all the veteran traders knew it. “Fresh meat,” as they saw it. I was picked off on my very first trade, putting me in the hole financially. That was the last time I would ever let that happen.
Our goal as a proprietary market-making firm was to be involved with as many trades as possible in which we could buy undervalued options and sell overvalued options. Any option position that we had on the books would constantly be re-hedged by trading the corresponding futures contracts.
A few years into pit life, our head futures trader went rogue and took on positions that were big enough to bring down the operation. And it did.
Our boss came in from Chicago to announce the closing of the NYC branch, but asked me to stick around to help unwind our open positions. It took me a few months, but I was able close the books without too much damage.
I was at a crossroads at that point on what to do next. I was 28 and had a good idea…
I’ll tell you more about it next week.