Yo Pit Crazies,

I hope you enjoy the Juneteenth holiday and come back rested and refreshed for the O DTE reveal in Mark’s Double Down strategy.  It will be hot like a heat wave!

My first big trade happened in 1992.  Now that was a while ago but I remember it like yesterday.  Magic Johnson of the Lakers sadly contracted AIDS and that set off a storm of AIDS vaccine biotech startups in the very slow summer of 1992.  The rest of the market was going to 0 after the S&L 1990-1991 crisis. Yes, we had a GFC 16 years before for exactly the same reason.  

Biotech was getting all the action and all the public order flow.  I was the Designated Primary Market Maker (DPM) in Immune Response Inc (Ticker IMNR) and at the time the leading name in the AIDS vaccine lottery.  My job was to keep an orderly market in a crazy biotech.  

Any company that invented the vaccine would be rich.  Wow does that sound familiar?  The problem was everyone and their mother was buying options in IMNR. Everyday, constantly.  I had the option implied volatility at the time to be as high as I could make it of around 130%.

Then a broker came in with the biggest order I had ever seen.

Yikes!

The Broker wanted to sell me 1000 puts At the Money for $8

The stock was going to the moon and I had to spend $800,000 on puts that no one wanted to buy.  As the DPM I had to give the broker an answer because he needed to sell them for what was his best customer at the time.  This customer sold big fat option premiums all over the floor and made a fortune that summer killing the recession volatility.

In my head I was selling 10 contracts for every one contract I was buying.  Also buying a put and buying stock is just buying a synthetic straddle and IMNR was moving at $7 gaps a day.  Normally I would only take 50% of an order but no one spoke so I took the whole trade, effectively doubling down on my normal volume.  When the other traders in the crowd finally figured it out and wanted a piece, I told them to pound sand.

What did IMNR do?  Rallied to the mid 60s and then tumbled to the mid 20s in two weeks.  I had a huge day and ended up being the highest grossing post for my firm that year, only my second year trading.

The premo seller, their $8 puts went to $30 and they curtailed some of their action.  When I saw an opportunity, I learned to take it fast because it might not be there again.

To Your Trading Success,