Episode 112 ... Jorge Soltero (73:09)

Lives in Puerto Rico
Native Puerto Rican
Not all flip-flops and shorts in Puerto Rico
Best of both worlds (commerce & leisure) in Puerto Rico
US regulations
Studied in the US
Philosophy major, University of Chicago
Lived in Chicago 25 years ago (aware of exchanges: Board, Merc, CBOE)
Had friends who worked on the floor
Worked for Archdiocese of Chicago, board member was bond trader
Admin job at Archdiocese, wasn't leaving a big salary job to try to trade
Asked quick-thinking math questions in interviews
Pacific Coast (San Francisco) used to have exclusive options listings for tech stocks
First job at Apollo Trading (small market making firm)
Clerk in currency pit on Merc floor, D-mark was huge, Yen big (1994?)
Always worked on options side
"Controlled chaos" on the floor
Eurodollar floor huge, you needed to be tall and strong and loud and aggressive
"You never want to be the biggest trader in the pit" (you need liquidity, avoid getting stuck)
Occasional scuffles and shoving matches, have to pay a fine for "non-business-like language"
Spend all day next to competition, not co-workers -- unique environment
Lots of settling of slights, real and perceived, off the floor
He'd be waiting off the floor at 4AM in San Francisco, floor opened at 4:30 AM, needed to claim spot in pit before 6:30 AM open
Left Apollo, got job at Hull Trading
Hull was well known, big user of trading technology, no third-party options pricing software
Timber Hill had its own options pricing software
Interview question: Stack of pennies as high as Sears Tower, would they fit in this room?
Hull Trading style -- never boredom traded, not cowboys ... very methodical, more confident
You have to trust your model if you trade options
Went from Ten Year Note pit to Equities (OEX) ... used to be super big deal, the OEX
Just trying to capture bid offer all day long
"Pit awareness" way ahead of the machines in the past, not true anymore
Blair Hull, blackjack "wizard"
Have an edge, exploit it when you have one, back off when you don't
Hard to find a copy of Thorp's original book
NCAA tournament a big recreational gambling thing
Hull guys would try to model everything, horse racing, NCAA, etc.
Hull bought by Goldman Sachs in 1999
You needed to fit in at Hull, everyone got along, traders, developers, etc. Good teamwork important.
Goldman Sachs a more competitive place than Hull
QQQQ just listed in 1999
Moved to London with Goldman Sachs, had no idea what he was walking into
Hard to switch from floor to screen, point and click and pick up phone
No energy, no noise from the crowd ... hard to judge market tone
Silence of being off-floor very strange, he was told to "please calm down"
Got into backdoor of institutional side through Goldman buyout
Moved to UBS, back in US, and then moved to Merrill Lynch (back in London from 2009)
Information edge that institutional trader has over retail trader is no longer large
Heavily regulated on institutional side, duty to find best price and structure for clients
Playing field no longer as distorted as it used to be
Position size matters and how you're going to use leverage
Enjoyed his pit days the most from his trading life
Now he's isolated, trading his own money
Institutional traders just reacting to client order flow
Go where the liquidity is
Mixed bag results for him for the last six months on his own, but he's optimistic
May have to hire a programmer to try out ideas, building models
First saw ETFs in 1996, thought they were a great product
ETFs liquid, cheap
Lots of ETFs have options listed on them
Twitter: @El_9uapo (Old joke from the Three Amigos movie)