The Treasure Hunterand lock in profits and link butterflies for zero [a butterfly strategy
links a number of option positions in hopes that the underlying will
remain in a narrow trading range] and sell them out to the order
flow for a buck or something.
Q: So string a hundred butterflies all together, so if one of them
made a hit, he would score?
A: Yeah, and other things like that such as linking butterflies for
zero, combined with cashing in on being able to trade the bid-offer
spread, and having a string of butterflies on and one of them, was
going to be in the money. Gold was less hectic and less volatile in
the mid- to late 1980s than it was earlier.
Q: Was he trading strictly options?
A: Yes.
Q: Or was he trading other instruments as well? Like hedging
with the underlying?
A: He was hedging with the underlying. We all were.
Q: Mechanically, where was the underlying trading, was it trad-
ing right next to you, how was the hedge done physically?
A: We had an order taker in the futures ring that worked for the
company. So I would be in the option pit and let’s say I bought 10
put options and the delta was 0.5 and the market was trading at
10.60. I’d immediately yell to him, “Greg, buy me five!” And then
he’d buy five futures against the put options I had just bought, and
then he’d report back something like, you know you bought them
at 10.71 and I’d yell FU or something [laughter]. And then right
after I bought 10.71, it would drop back to 10.60 [laughter].