Chicago hope: what the future holds for derivatives

Discussion in 'Wall St. News' started by archon, May 12, 2008.

  1. archon


    Chicago hope: what the future holds for derivatives

    Barron's, the Dow Jones Business and Financial Weekly

    12 May 2008

    Thirty-five years ago, the modern options industry was born, with the opening of the Chicago Board Options Exchange. On April 26, 1973, the first day of trading, a mere 911 contracts changed hands. Last year, the exchange handled almost 945 million contracts, attesting to the enormously important role that options now play in the financial and commodities markets.

    To commemorate the industry's birth and huge growth—and thus, the recognition that risk can be quantified and traded—the CBOE last week gathered some of those who had been present at the creation to predict what the future holds for the whirling world of puts and calls.

    The event, which drew about 250 people to the exchange's auditorium, was moderated by Ed Finn, the editor and president of Barron's.

    The big attraction, of course, was the all-star roster of panelists, including Chicago Board Options Exchange Chairman and CEO William J. Brodsky, economists Robert Merton and Myron Scholes (fathers, along with Fischer Black, of the Black-Scholes options-pricing formula, for which they won a Nobel prize in 1997), and two veteran traders who have used options to stunningly profitable effect: Jeffrey Yass, the founder of Susquehanna International Group, and Blair Hull, who founded Matlock Capital (and in 2004 ran unsuccessfully in the Illinois Democratic primary for a US Senate seat, losing out to a fellow named Barack Obama.).

    All the panelists see options continuing to grow in importance, as individuals and institutions increasingly seek to balance return and risk in a volatile investment universe. To learn what they had to say, read on...