BIO: Mark Longo is the Founder & CEO of the Options Insider Media Group. A former Chicago Board Options Exchange (CBOE) member, Mark created the first options podcast over 15 years ago.
STORY: Mark was working as an equity puts trader on the floor of the CBOE when, one day, every broker on the floor started calling out orders for puts. Mark, however, was hesitant to join in the funfair. This caused him a few dollars but saved him a lot more because the S&P futures started tumbling, traders lost millions of dollars, and many lost their jobs after that.
LEARNING: Listen to your intuition. Don't be afraid to walk away from an option that looks too good to be true. There will always be other options to trade.
“When a trade is just too perfect, don't be afraid to look that gift horse in the mouth."
Mark Longo
Guest profile
Mark Longo is the Founder & CEO of the Options Insider Media Group. A former member of the Chicago Board Options Exchange (CBOE), Mark created the first options podcast over 15 years ago. That single program has since grown into the Options Insider Radio Network - the world’s leading podcast network for options traders. Known as “the voice of options” for his pioneering work in digital media, Mark now hosts a variety of long-running programs, including Options Boot Camp, Volatility Views, and This Week in Futures Options, among others.
Worst investment ever
Mark was a new trader right out of college when he was recruited in Chicago, the Mecca, for trading options. Mark focused on the equity options. He got to break into the SPX pit, which was the biggest pit at the time. This was around 1999 when the Dotcom bubble was in full swing, and stocks only went up. This was when firms were recruiting massive D1 linemen to hold a physical presence on the trading floor. Physical presence was the thing. So Mark had to break into the back of this crowd of hundreds of men who did not want him there. Another firm wanted his spot, so they sent a former professional hockey goon to try to take that spot from him. And while all this was happening, Mark was trying to learn SPX.
Mark was finally breaking into the new trade. One day in early 1999—a quiet day as it often was on the trading floor—Mark was sure it would be a dull day, so he was sitting at the back of his spot waiting for something to happen. Suddenly the phone rang on the far side of the pit. A broker picked up the call and talked to his customer, and he started calling out a market for some slightly out-of-the-money puts in the S&P. Another phone rang, and another broker talked to his customer; he started barking out an order for similar puts. This was kind of strange. Mark thought to himself that it was just customers looking for puts.
Then more phones started ringing in the front of the pit, and those brokers picked up their phones, and they, too, talked to customers and started calling out orders for puts. Mark could see the ticker in the pit SPX wasn't moving, and the next thing every broker in the pit was lifting offers on these puts. Typically, a broker would get a call from a customer, and he'd call out a market, then it would be a bidding song and dance that takes forever because no one ever lifts your offer instantly. So the fact that not just one broker but all were doing it simultaneously was strange. Everyone was trampling each other to get the brokers to sell these puts.
Mark, however, decided not to join the bandwagon. He just took a moment, stepped back, and pulled his hand down. And in just seconds, the S&P futures started tumbling. Many traders lost millions of dollars, and many more lost their jobs.
Turns out, Robert Rubin had suddenly resigned. This was in the middle of the Dotcom bubble, and the Treasury Secretary was a big deal. His sudden resignation shocked the hell out of the markets.
Lessons learned
- When a trade is just too perfect, fits all your conditions, and seems like free money, take a step back because you could be missing something.
- It's okay to listen to your intuition when it's warning you something isn't right.
- Don't be afraid to walk away from an option that looks too good to be true. There's always a reason that it's priced at that level.
Andrew's takeaways
- Pay attention to your intuition.
- Remember, a lot is always going on behind a trade, and if you feel nervous, maybe it's time to back off.
Actionable advice
It's okay not to make a trade. There will always be others. So instead of trading in microseconds, spend some time doing your due diligence.
Mark's recommended resources
- Go to the Options Insider Media Group to access a dozen different shows with great content in the world of options.
- If you'd like exclusive content, try out the Options Insider Memberships to listen to podcasts live before they are available to stream on all major platforms and listen to Mark's company's exclusive podcasts.
No.1 goal for the next 12 months
Mark's number one goal for the next 12 months is to help new traders find ways to migrate away from low-probability types of trades and get them to trade options that have a much higher probability and good longer-term style.
Parting words
“If you miss a trade, it's okay; there will be more great ones. Don't be afraid to look that gift horse in the mouth every once in a while.”
Mark Longo
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