We’ve been hearing about it for months. Jim Bittman and Russell Rhoads call it “The Game” against Spot Trading (A proprietary trading firm located seven floors below CBOE’s Regulation Department at 440 S. LaSalle). Jim and Russell got a good amount of entertainment by not explaining how to play the game, regardless of the amount of nagging and insisting us interns did to try to get a leg up on the competition.
21 CBOE interns, not knowing anything about what we were about to get ourselves into or what the competition was like over at Spot Trading, made the trek up the 28 floors to the Spot Trading office where our unknowing fate (under)lies (bad options pun). We walked into the large corner conference room, and immediately lost our concentration after noticing the inmates at the Metropolitan Correctional Center playing basketball up on the roof of their facility. One of the more interesting views a few of us interns are lucky enough to have from the regulation department.
Our group of interns got settled into our teams of two and three and noticed the Spot trading interns, along with their first year trainees, started filing in. Rough estimates lead me to believe that they outnumbered us by about six or seven people. Nothing like starting a race 30 feet behind the competition. Jim, Russell, along with Deborah Lenchard from Spot Trading presented themselves in the front of the room and Jim began to explain what we were going to do.
“The Game” turned out to be an options trading simulation game that involved Jim rolling dice (referred to as “random number generators”) to choose one of twelve stocks on strategy cards (Covered Call, Long Straddle, Butterfly Spread, etc). Each strategy was appropriate for whichever kind of market movement occurred (Bullish, Neutral, or Bearish) and you either made or lost money based on this decision and the markets next movement. This all seemed straight forward enough, especially since having respectable options strategy knowledge under our belts from the Options Institute. We CBOE underdogs had fire in our eyes and a chip on our shoulder from the Spot interns proving superior last year. Jim rang the (imaginary) bell and the market opened!
Jim was changing the market based on dice roles and shouting out whether the market was moving up or down. The mood started off tame for most because our starting amount was only $10,000. However, those were the people who didn’t end up with $36,000 by the third round. Fellow intern Charlie Burdick and I were in first by over $10,000, which was an enormous morale booster for the CBOE interns. We “bet the bank” just about every time and it was evident that the instructing of Jim and Russell had paid off because we were gaining maximum profitability on the majority of our trades. By the halfway mark, the emotions in the room were vastly divided. People were either making a lot of (imaginary) money or considering taking out a second mortgage for their (imaginary) houses.
The methodology each team had for choosing their investments was quite interesting. Some teams, changed it up every time, and some teams stuck with two or three strategies, which worked out for them surprisingly well. As we came closer to the last few turns, each team had a large decision to make: stick to their guns, or go for broke and bring another year of bragging rights back to their respective companies. Charlie and I, along with many other teams, made the obvious decision to get a taste of that fictitious financial glory. We wanted to “risk it to get the biscuit” in the last market movement.
Based on the mountain the market was climbing with great force, we believed it was due for a sharp drop. We were right. The market dropped like Bambi on ice. Unfortunately, we were short on overall return compared to the Spot teams. A full analysis is still in the works, but based on the ending positions, the home team walked away with the two highest overall returns. A few interns here at CBOE however might have to run an audit on that analysis and Spot’s score sheets just for good measure.
“The Game” that Jim and Russell proctored so well was truly a fun, competitive breakdown of how someone can look into the options market through basic analysis of various investment strategies and profitability matrixes. We all found out very quickly that it was just like riding a bike. As soon as we got on the bike and started riding we had a blast. We were bound to fall down and scrape our knees once or twice but we just had to get back on the bike and move on.
Intern at CBOE