INTERVIEW
“There’s something to be said about being where all the action is. You can feel the market better when you are on the trading floor.”
Taking The Market One Option At A Time
Getting To Know Options With Dan Passarelli
If you want to learn more about options, here’s a trader who might be able to help you. Dan Passarelli is the author of the book Trading Option Greeks and president of Market Taker Mentoring, Llc (www.MarketTaker.com), which provides personalized one-on-one mentoring for option traders. Passarelli started his trading career on the floor of the Chicago Board Options Exchange (Cboe) as an equity option market maker. He also traded agricultural options and futures on the floor of the Chicago Board of Trade (Cbot). In 2005, Passarelli joined Cboe’s Options Institute and began teaching both basic and advanced trading concepts to retail traders, brokers, institutional traders, financial planners and advisors, money managers, and market makers. In addition to his work with the Cboe, he taught option strategies at the Options Industry Council (Oic). Passarelli has been featured on television and radio and has written numerous articles in the financial press.
Dan Passarelli was interviewed on March 11, 2009, via telephone by Stocks & Commodities Editor Jayanthi Gopalakrishnan (JG) and Staff Writer Bruce Faber (BF).
Dan, how did you get interested in trading?
Ever since I was a kid I was interested in trading. I enjoyed looking up the stocks in the Sunday newspaper and trying to figure it all out, as far back as I can remember. I went to college here in Chicago and I would walk down to the Board of Trade when it was open to the public. I would go up to the visitors’ gallery and just watch the trading on the floor. I found it all fascinating.
JG: What was your first job that was related to trading?
I got into the trading business the old-fashioned way. I didn’t really know anyone down on the floor, so after college I printed up a stack of resumes, put on my best suit, and went into the Chicago Board of Trade (Cbot) building, and I knocked on every single door in the entire building from the ground floor to the top. If someone answered, I handed out my resume and said, “I want a job doing something here, anything, whatever that might be.”
BF: Did that work?
I ended up getting a job as a runner, which is basically somebody who runs back and forth carrying an order, or a piece of paper, or a note, or something to one of the traders on the floor. It was an entry-level job, but I worked my way up and ended up as a clerk for a trader. As a clerk, I would watch all the trades that the trader would make and try to figure out why he would do it, and learned by basically looking over his shoulder.
JG: How long were you a clerk?
A couple of years. After that, I decided I would do it on my own. I looked around for a backer and hooked up with the late Steve Fossett. I traded for him for about seven years.
JG: What were you trading at that point?
Equity options. I traded in the Ford Motor pit. I traded options on about 20 to 25 stocks.
JG: What did you do after trading for Fossett?
He ended up getting out of the business so he basically sold that part of his company, but it didn’t matter too much. My trading career on the floor of the Chicago Board Options Exchange (Cboe) lasted about seven years. After that I did a bit of trading in my personal accounts. That is basically when I got into option education.
JG: After you were a floor trader, you became an off-floor trader, I take it? How was trading different off the floor compared to being on the floor, and why did you make that move?
I decided to leave trading for a couple of reasons. One, I got interested in option education and wanted to explore that. But it was also a difficult time for a floor trader. That was back when the markets first started getting tight. That was when multiple listing started. That was when the Ise, the big competitor of the Cboe, got online. It became a very competitive time for floor traders with decimalization, first on stocks and then on options.