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Memoirs of a Minyan: War Stories


The purpose of the journey is the journey itself.

There were several regime changes during my time in the derivative department. Chuck retired after my third year and handed the leadership baton to a younger, more quantitative risk-manager.

I was officially part of the starting rotation. My compensation paled in comparison to other traders and perhaps that's why I felt somewhat secure.

In terms of bang for the buck, I was the best deal on the desk.

With new management in place, my performance gained steam and with time and experience, I produced in a more meaningful manner. Every day was dynamic and different, like an ever-changing jigsaw puzzle that fit together to form a bottom line.

When a customer wanted to trade one of my "names," the order was dropped directly on my desk. I no longer had to check with Jack or Tommy; I had discretion to determine what I wanted to position. Autonomy is the ultimate sign of respect on Wall Street and once that arrived, the money wasn't far behind.

At the end of 1994 when bonus time arrived, management pulled me in back and informed me my total compensation was $150,000.

Drinks were on me.

The Moment of Truth

Things really started to come together. I built the bank pad into one of the biggest on the Street and word quickly spread about the aggressive kid from Morgan.

If a customer had something to do in the sector, I was the call. I traded huge positions and plunked money in Mother Morgan's till. It was a beautiful thing.

Keefe Bruyette was the biggest player in the financials on the Street and the crown jewel of my customer base. I worked hard to impress their head trader and before long, secured the majority of their flow.

NationsBank, Chemical Bank, Chase Manhattan Bank (JPM)-you name it, we traded it. I was only 26 years old but had established myself as a customer friendly producer and if you wanted to trade a bank, you came to Morgan and you would get taken care of.

The First Interstate position began like any other. The stock was trading near $70 when Keefe's head trader asked Kim Dispigna, his Morgan salesperson, for a market in the Jan par leaps (January 100 call options that expired the following January).

I checked the floor and found that the options were three dollars wide and 50 up, meaning the customer could buy or sell 50 contracts on either side of an illiquid market.

"What odd-lots," I thought to myself as I tightened the market and increased the size tenfold. "Whatever he needs," I remember telling Kim, "Just get the order."

Keefe built upside exposure for a few days and before long, I had a large position. I was short call options to my customer (which gave him the right to purchase stock) and I owned the equity to hedge my risk.

They became increasingly aggressive and I had trouble keeping up; the floor wouldn't sell any more calls and I was the only means of facilitation.

Finally, after several weeks, the customer asked what the position limit was.

"8500 contracts," I replied, "That's as many contracts as he's allowed to buy, according the exchange." We were almost there.

To say that I was involved in First Interstate is like saying that Google is involved in the Internet. If anyone on Wall Street had something to do in the name, they knew Morgan Stanley was the call.

I had a massive position-short calls to my customer and long everything under the sun against them. I assumed the customer knew something and I went along for the ride.

I traded that monster for months. When I liked the market, I pressed my upside bet. When I didn't like the tape, I shorted other banks against it. At no point did I waver from my conviction or abandon the position.

Everyone in the room knew the story and I was sitting atop the train waiting for it to pull into the Promised Land.

Stress? Sure, but I had an edge and it was razor sharp.

Cuts Like a Knife

It was a slow afternoon when Kim's voice cut through the quiet room.

"How'ya makin' Letter I?"

I looked at her and smiled, assuming she was teasing, as she was apt to do.

I looked at my screen, not bothering to call my broker to see what the floor market was. "There's 50 offered at 23 1/2, I'll make it 500. Whataya wanna do?" I said, calling her bluff.

"He needs a two-sided market."



I looked her in the eye, a smile no longer on my face. "21 1/2-23 1/2 500 up," I offered with a slight crack in my voice.

"He'll sell ya' 500 at 1/2" she shot back, "and he's got more behind it."

I'm not sure I breathed the next several minutes. I slapped 500 on the tape and called my floor broker to sell some of my underlying exposure.

Unfortunately, every option trader on the floor knew the size of my position and the stock was knocked for a buck before I could blink.

The closing bell was an hour away and an uneventful session suddenly became the most important day of my career.

"Keep reflecting bids," Kim said, "I think he wants to get done today."

I needed to make sales and asked the customer if I could "get in shape" and he told me to go for it.

I sold stock, preparing to trade another slug of calls. If the customer was going to sell 8000 call options-which represented 800,000 shares-I knew I would have to buy most of them. With 15 minutes left in the session, I yelled "Figure bid for 8000!"

I needed Keefe to sell me the rest of his position so I could unwind my risk and work off the remaining exposure in the marketplace. I watched Kim as she spoke to the head trader, clenching my jaw as I held the phone tightly to my ear. My floor broker was at the ready.

"GREAT bid," she said, "He's gonna hold tight and finish up in the morning."
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