AN OXFORD CLUB PUBLICATION

Bryan Bottarelli's Real-Life Tales From the CBOE

Bryan Bottarelli, Head Trade Tactician, Monument Traders Alliance

I want to share with you one of my favorite stories from my early days on the Chicago Board Options Exchange (CBOE).

This story - as you'll see - is personal, offensive and borderline embarrassing.

However, I'd still like to share it with you because it shows you who I am and how it molded me into the trader I am today.

(I apologize in advance for the language used throughout this story, but I'd like to tell you the events exactly as they occurred. And on the CBOE, that often means some very colorful language.)

You ready? Then here goes...

I was barely 22 years old, and I was about to start the first week at my first "real" job after graduating college.

I took the Brown Line on Chicago's "L" train into the heart of the Loop at 141 W. Jackson Blvd. At the foot of the "Canyon," I stared up at the one of the most iconic structures in the city, the Chicago Board of Trade Building.

Seeing Ceres, the Roman goddess of agriculture, at the peak, I knew my life as a trader had officially begun.

I felt exhilarated as I passed by all the commodities traders smoking outside in their colorful jackets.

I was also terrified I would get chewed up and spit out in less than a month.

Did I belong here? I wasn't sure of the answer.

So I took a deep breath, remembered the Woody Allen quote "90% of success is just showing up" and entered the revolving door into the lobby of the CBOE.

At the CBOE, you must first pass a series of tests before a firm will allow you to trade for it.

The first of these test phases is intensive mock trading sessions, which occur immediately after the close of trading.

All of the new hires gather around a whiteboard to simulate a trading pit, and the firm's real-life traders walk them through various trading scenarios that they experience on the floor.

Each week, a different floor trader is asked to lead these mock sessions.

As luck would have it, for my first week on the job, the trader leading the mock session just so happened to be the biggest a-hole at the CBOE.

I'm not exaggerating or being mean-spirited. It was common knowledge on the trading floor. This guy was nasty, and he was feared. I won't reveal his name. I will, however, refer to him using the letters on his badge, "MUC."

Okay, so let me paint this picture for you...

It was my first week at the firm, and I wanted to dive right into the mock trading session. I was surrounded by more than half a dozen other trainees who all started before I did. So they had a better understanding of what was happening.

They also knew MUC, and I suspect they purposely failed to share his reputation with me.

I quickly found out about it the hard way...

The session began, and mock trades started getting filled. MUC said, "I've got 200 Microsoft January $75 calls at $2.10." Two trainees yelled, "Buy them!"

MUC said, "Filled! I've got 300 Apple January $80 calls at $3.50." Three other traders yelled, "Buy them!" MUC responded, "Filled!"

All the while, I stood in the back of the group just observing. The game seemed easy enough. MUC offers some contracts, and if they hit your bid-ask spread, you trade them.

I thought, "Okay... I can do this."

MUC said, "I've got 400 Apple January $100 puts at $5.50."

The room went silent for a second or two. MUC was playing a trick. He used the $5.50 price for the Apple $100 calls but said "puts" instead, and I hadn't noticed. So I stepped forward confidently and yelled, "Buy them!"

And in one of those "needle scratch on a record" moments, everyone turned around and stared at me.

My heart hit the floor.

MUC looked livid.

The trading pit parted like the Red Sea... and MUC got up in my face and screamed, "Why did you buy those puts?"

Shell-shocked, I responded, "They hit my bid, so I bought them."

The other mock traders in the pit started snickering. Some of them exchanged glances as if to say, "Get ready for another trainee to quit on day No. 1."

MUC's face was bleeding out a shade of purple. His eyes were bulging out of his head. And I could feel the steam coming out of his ears.

I obviously did something idiotic. But what? Nobody was explaining anything.

Thinking that I'm a trainee (here to learn about proper options trading) and he's my instructor tasked with teaching me how to properly trade, I asked a simple question, "Why shouldn't I have bought those puts?"

That's when MUC exploded...

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"Why not?" he screamed. "I'll tell you..."

And here's his moment of teaching...

He got nose to nose with me - spitting his stale coffee breath into my face - and yelled, "Because if you buy those f***ing puts, you're f***ing f***ed!"

With that, he spiked his clipboard into the ground, sending his pens and paper flying everywhere, and stormed out of the room. And just like that... the mock trading session that day was over.

I stood there, still in shock, as my fellow trainees said, "Nice job, d***head" and "Good way to start your trading career," all as they packed up for the day.

It was right then and there that I realized trading is a cutthroat game.

It's brutal. It's stressful. And it's you against the world.

If I had any desire to be successful in this new world of CBOE trading, I had to man up.

Armed with this new mentality, I walked into the office the next day. Of course, the first face I saw was MUC's.

He wasn't done berating me...

Getting the attention of the entire trading group, he announced, "Hey, everyone, my dips**t trainee here - who owns 400 Apple January $100 puts at $5.50 - has volunteered to get everyone doughnuts."

"Great," I thought. "Now the entire firm knows I'm the moron from yesterday's mock session."

He flipped me a $20 bill, told me to go down to the doughnut shop three blocks away and get everyone whatever they wanted. He added, "And be back before the open, God damn it!"

Embarrassed and stressed out (yet again), I started taking down everyone's order. That's when MUC slid over to me and said in a scolding tone, "Whatever you do, make sure to get me two chocolate custard-filled doughnuts."

That's when it hit me... It was time to turn the tables.

To this day, I'm still proud of what happened next...

Just as instructed, I took MUC's $20 and went down to the doughnut shop. I got everyone exactly what they wanted - with the exception of MUC's two chocolate custard-filled doughnuts.

I "forgot" about getting those. Oops!

I walked into the office with a huge smile on my face and handed the boxes of doughnuts over to MUC. All the other traders dived in, grabbed their flavors and thanked me for running the errand. As MUC rifled through the two boxes, he realized his chocolate custard doughnuts were not in there.

I could sense his temperature rising.

In fact, the entire firm realized he was about to go off on me - again.

Yes, indeed, the MUC volcano was about to erupt for the second day in a row, and everyone was sitting front and center for the show. He screamed, "Hey! Where the h*** are my chocolate custard-filled?"

That's when I turned to him, looked him square in the eye and said in the most smug, condescending way possible, "Oh, sorry, I must have forgotten to get those."

Then I carelessly flipped him his $0.78 in change, turned around and walked away...

As I walked down the hallway, I could hear the entire firm erupt in uproarious laughter.

Someone yelled, "Did that really just happen?"

This newbie - this fresh fish just out of college - just stuck it in the face of the biggest hard-a** on the CBOE trading floor, and everyone was there to witness it.

It was legendary.

Looking back, that's the moment I officially "arrived" at the firm. For the remainder of that day, I was approached by a bunch of the firm's traders, who introduced themselves and congratulated me for such an incredible moment.

"That was the best thing I've ever seen," said one of them, who fully appreciated the intimidating impact MUC could have on young traders.

A few other traders even pulled me aside and actually explained what happened in the mock session. Apparently, MUC had pulled the same trick on them - switching the prices of the calls for puts when they were trainees - and they walked me through the logic.

Just like that, I had allies.

I showed confidence - I took a big risk - and it all paid off.

Now, I'm telling you this story for a couple of reasons. First, I want you to understand a "Pro Trader's" (and my) mentality: confident... brash... and eager to win.

Second, the most important lessons about trading weren't taught by my jerk boss. The learning came from my fellow traders, who helped me understand what I did wrong and how I could be a better trader in the future.

I was baptized by fire in the CBOE pits. I learned the hard way. And I'm ready to pass my knowledge on to you.

Oh, and as for MUC... from that day forward, he never asked me to get him doughnuts again. That's what I call a win-win.

I hope you enjoyed this little CBOE memory.

I have hundreds more, some of which I'd like to share with you at the War Room Open House event next week.

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