Jimmy Cliff and Jimmy Wales

Been researching the derivatives industry a bit. It's pretty hard to find real deal professionals amongst all the get-rich-quick schemes online, but on a hunch I went hunting for some history on Jimmy Wales, one of the founders of Wikipedia and its primary early funding source. I ended up finding out that he was a prolific poster on the newsgroups from 1996-1998 and spent a ton of time in the objectivism newsgroups, which maybe is a little suspect, and strangely, in misc.invest.financial-plan, as opposed to the more esoteric newsgroups related to mathematical finance.

Here's one of the few posts related to his former career. It's not particularly new to me, as I did know a fair bit about the advantage market makers and pros have in the derivatives market, with their minuscule transactional costs. I think if more people knew that, the less willing they'd be to subscribe to seminars and schemes, aside from all the other equipment and know-how that people employ. That said, options trading is the ultimate in model-based, quantitative, theoretical trading, and so it still feels a little weird to me. Going in with my limited means, buying or selling a few puts or calls here at random -- am I a David versus Goliaths? It's hard to say, and it depends a lot on whether you think 1. the market is biased towards professionals and member firms and institutions and 2. that prognostication can be done mathematically -- something I'm still very doubtful of, not because of the math, but because of the prognostication. So knowing that prognostication is not possible, the only wait to defend against unexpected events is to be less exposed, as a portion of your portfolio. Cash management, bla bla.

(For interesting reference, here is one of the few derivatives related things that Wales recommends reading on the newsgroups, Don M. Chance's Derivatives 'R Us postings.)

I think another interesting thing that I took away from all this is that options trading firms typically seem to be this maverick organizations, since the equity requirements to be a member of the Chicago Board is 200 grand. Well, and a lot of other paperwork I think, but overall there isn't that kind of regulation that you see in stocks and bonds, and I think options trading houses tend to be even more out there than hedge funds, which tend to service clients and less inclined to the actions of the proprietary trading houses since they're dealing with client money. Or maybe it's the other way around?