Episode 107 ... Anthony Saliba (110:14)

Options in China as the last frontier
120MM retail investors in China
Jan 1998, last day of floor trading in Australia
Lives in Milan but has house in Chicago
Helped exchanges around the world make switch from open outcry to screen-based trading
Only ASX gave Saliba's company credit for successful transition
Believes options are a great product
Was a stockbroker right out of college, 21 years old, in Indianapolis
Era of Jimmy Carter, Stagflation
Read a lot about options
Closing prices came in the newspaper the next day
Clients did call and ask where prices closed
Bally was the hot stock of the day
Client invited him to trade on floor in Chicago (CBOE)
Guy he caddied for also worked on CBOE
Partnered with guy he caddied for, made half a million dollars by 1981, bought him out
Had a mainframe available that he could plug into for theoretical values
Teledyne another hot stock of the day (IBM, Honeywell, Hewlett-Packard)
He would trade bigger than peers because he'd use spreads
Personal computer became a thing in 1984, hired a programmer to write software
On the CBOE floor for 13 years
Glossed over almost busting out early on
Started out with $50,000 dropped quickly to $15,000 over five weeks
Filled with loathing and despair
Started out with someone else's money, "Julian Good"
Switched from Teledyne to Boeing, trading one lots
Goal of making $200-$300 a day
Wrestler and cross country runner in high school, so he's disciplined
Went back to Teledyne pit but using his Boeing pit discipline
Made six figures a month or more
Punting is anathema to him, just chip away day after day instead
Realized trading not as easy as he thought, lots of introspection
Son of a carpenter
When you get hurt (lose money), trade smaller and chip away
Still trading Teledyne in 1984
Short squeeze in Teledyne, rallied 50 points, Saliba got scared by this
Leon Cooperman the Teledyne analyst at Goldman Sachs in 1984
Teledyne eventually hit $320 a share in three months
Tried to trade currency options like he did equity options, got killed
Sep. 1985 move in Yen (4-5% rally), he got his ass kicked
Had Quotrek machine by his bed
No respite when you trade currencies
Lost $2MM in two years trading currency options
He likes to give back, loved the CBOE, did marketing trips to regional brokerage offices
Edmund Andrews wanted to write story about an options market maker
By chance, Andrews happened to be in Chicago day after 1987 crash
Andrews followed Saliba around on Oct. 20, 1987 (day after crash) ... Saliba was age 32 then
Andrews' story on cover of Success magazine, January 1988 [I will look for this in library]
CBOE didn't like it, market makers supposed to be low profile
Looking in pictures like the cat that had eaten the canary (this was frowned upon)
Lot of people on the floor who never knew what they were doing
He saw the structure of the market differently from others
Some were slaves to the Greeks: delta, gamma, vega
Others were trading directionally using technical analysis
Saliba tried to create low-cost spreads with easy-to-understand risks
Left floor in 1991
Not a quant guy
Not good at math in school
But he's very disciplined ... later on used a lot of automation
"Necessity is the mother of invention"
Youngest brother works for Goldman Sachs (in options)
"Staying spread is staying alive"
In 1988 tried to train a group of traders, frustrating, wanted to automate it
Spent money on programmers to build simulator, cost more than he expected, had to figure out how to sell it to others
Germany was on Unix using Sun systems
Saliba arrived in Frankfurt (Deutsche Bank) 1989, trained them all
Charles Cottle "The Risk Doctor" his partner in this venture
Mentions Shelly Natenberg book
Teaching the mechanics of options making, better risk management
Had no Holy Grail that he was exposing by teaching others
Traits of a good trader:

Discipline (stick to a plan),
Creativity (coming up with a plan),
Humility (willing to scrap a plan),
Good sense of humor (can't take it too seriously when you miss things),
Intelligence,
Diligence

"Swivel chairing" -- one platform for idea generation, one for trade execution
Markets are less forgiving today than when he started out
Discipine: sticking to risk and size guidelines, sticking to the plan
Can't determine why you make or lose money if you don't stick to plan
Why did pros he know miss the Trump win that night? It was a shock, Saliba was scared too, not sure correction overblown
Night of Brexit, Saliba identified it as hand-wringing and should be bought
He has always adapted, hates the term "re-inventing" oneself
Has developed and sold a lot of software products that solve problems
Wife says he has too many ideas
Kissed a lot of frogs on the way to the princess (talking about investments, not his wife)
Has lots of very diverse investments now (golf courses, insurance, healthcare, etc.)
Nephew and brother have found a lot of deals for him
He was born poor (but in America, not in a global sense), father lived hand to mouth, had seven kids
Upbringing helped him respect the value of things
Don't be a curmudgeonly scrooge type, but you have to stay grounded when you make big money
He wouldn't have been as driven as he was without being born poor
His own kids are entitled, don't have his drive or hunger
"Success skips a generation"
Millennials don't have the hunger, they ask "what does the world owe me?"
Saliba is gracious, humble, honest ... and says some nice things to Aaron in parting