The Stock Market Crash of 1987 | Cancel Crash

this is the nightly Business Report good evening everyone the law of gravity hit Wall Street today and financial markets around the world for that matter as stock prices plunged even more than they did on black Tuesday of 1929 you it was the defining moment of the 1980s October 19 1987 the Dow Jones Industrial Average plunged 508 points the largest single-day drop in the history of the stock market you could just tell people were like you know there was guys with their heads down you know a few people crying because they lost everything well you're thinking how much lower can it go it was the only time I've seen fear take over over green I've often said that it was the most frightening moment in my life there were a dear record number of people gathering outside the New York Stock Exchange today the sort of witness history in the making the world braced itself for another Great Depression but it was Tuesday October 20th that the financial markets came within minutes of a total meltdown the economic news in the country wasn't particularly good the dollar was in a little bit of freefall and so here you were with all of this opportunity for the market to correct the New York Stock Exchange the epicenter of the world financial system was under siege but the saviors of the markets were on the trading floors in Chicago the 1980s America is flush with cash riding high on the boon of Reaganomics displays of wealth are all too conspicuous and the market is a raging bull it was an incredible market we didn't have to remember as traders we couldn't care less why there was a bull run I mean you know the Cubs were in the 84 playoffs there was you know the the city was up for grabs we were all young we were the house we were the casino public orders would come in it would sell to our bids they would buy from our offers and we made money from you know the space in between so we all made a lot of money in the early 80s we were young kids with way too much money you could always buy puts and calls going way back in history at the stock exchange but when the CBOE came about that really created a market for options trading and hedging to protect a portfolio of dow stocks the trade in New York a futures market was created in Chicago once they agreed I knew we could do stock index features and I convinced um Standard & Poor's which was then its own corporation was later was bought by mcgraw-hill I convinced Standard & Poor's to give us license to launch stock indexes and that was launched in 82 the markets were wide they were good if you were like anything else you know there was definitely there was definitely a market to exploit we were making money because you could kind of drive a truck through the markets and there was a ridiculous amount of order we called the paper but there was a ridiculous amount of orders at the time it's the greed is good 80s everything is you know money-making hand over fist greed for lack of a better word is good Wall Street's Gordon Gekko based on Maverick icon Ivan Boesky harness the power of computers to become the most successful trader of the day what computers have done for the world of trading at least for the world of retail trading is really unbelievable the gap between institutional professional trading and retail trading was huge back in the 80s and even into the early 90s as late as 1985 on the CBOE and the Pacific Stock Exchange they would not allow you to have a computer on the floor but by the mid 1980s program trading was the dominant trading strategy on Wall Street the idea was to give institutions and individuals if they had enough money a way to hedge of bet as well as to create a portfolio of stocks in one sort of swift action if you will one purchase one sale by dumping a billion dollars worth of stock into the market with the press of a button a program trader could single-handedly lower the value of stock if the stock was part of the Dow Jones Industrial Average the transaction had the potential to move the Dow so the Dow Jones Industrial Average represents an average price of a basket of stocks in this particular basket there are 30 different stocks and each receives a weight corresponding to its price so you're just taking the average of these prices for 30 companies the major market index is a group of 20 stocks that mirror the dome they're all very large stature looking at the IBM's and all the glue chips this index trades at the Chicago Board of Trade 17 of the 20 MMI stocks are also part of the Dow the purchase of those 17 stocks would increase the major market index and could also move the Dow in the MMI just go put large buy orders in or large sell orders into 20 stocks and you could effect a change if your orders are big enough again in the long run the markets always bigger than any participant in the short run you could probably move that index a little bit on August 25th 1987 the Dow Jones Industrial Average reached its peak of 27 22 taxes were low inflation rate was declining contrarian stated the market was overdue for a correction in the aftermath of the 87 crash analysts pointed to world events as the culprits most traders were not as convinced this was in here where we still thought news is relevant when you're standing in the pits back in the day when everything was so busy and active the markets move before you ever even see the news so I mean we we would have a new screen all over the pit but you would never see that I mean you could never act fast enough look there's 400 people watching the same bit of news there may be one order it's not like you had access to it work on it has been the general philosophy for years and years at the stock exchange I want to acquire a position I've got a month or two weeks or three days whatever the time frame is I don't have to buy it all today and when you hear somebody say I want to sell it now it changes something in your mindset so even if you wanted to close positions that your only Avenue delay risk off at that time was selling futures and that's why futures got I think a little bit ahead of where the rest of the market the fact that people who were trying to implement the portfolio insurance strategies thought that they could sell futures at any time that they wanted but there wasn't the liquidity so it was really at an illusion of liquidity that caused of the 87 crash you stock market we are told is always delivering a message the only trick is knowing how to read it this week the Dow crashed more than 235 points and set a bundle of other nasty all-time records in the process on Friday October 16th less than two months after reaching a record high of 27 22 the Dow plummets 108 points the largest sell-off in US history the Friday comes markets going crazy you gotta remember I think it was 1984 was the first time we ever had a fifty dollar update now we got a hundred dollar down day I mean this is a huge move in the Dow oh my lord did they know what they were doing was there any opportunity to to liquidate some of the positions so we're not carrying it in over a weekend and everything is going crazy they're talking about implosion it's expiration Friday on October 16th expiration Friday was my biggest trading day ever biggest and when I say I don't mean money that I made I mean number of contracts that I traded I got there that morning at 2:30 in the morning we're behind the gates where they first opened for the sea Bell and the doors would open at 6 o'clock and then we'd be able to go in at 6 o'clock and put a card down where we want to stand put the card down at 6 o'clock came back in never moved the whole day my Friday was probably the busiest day I ever had in my life as a floor broker I couldn't breathe I had I was backlogged with orders I was just trying to fill it any order I could the best I could and move on to the next order it was I use expression organized chaos before that was chaos with no organization the broker standing next to me at one point had an order he had one order for 25,000 cheap calls to sell there was another order I saw I remember that he had with like like 11,000 costs I mean like a ridiculous number that Friday was to this you know through the rest of my career was the most contracts I had ever traded it one day I made a lot of money that Friday but I was more concerned about what was gonna happen for the rest of my life and I had this bid in for this seat 260 grand that was gonna be worthless I think that day you know all of us that traded in a certain area of the pit probably traded the most contracts we've ever traded and I scream my lungs out I think I saw pieces of lung fly out many investors believe the bottom of the market has finally been hit they're wrong we were going to Vegas that Friday night this how crazy was we're drenched in sweat we never left the floor we had our bags packed upstairs and remember your 20 was at the time maybe 87 so that's 25 years ago so I'm like not even 30 okay and I'm sitting there on my way to Vegas and you're not giving up your trip to Vegas and then we were the plane was leaving at like 6 o'clock and we weren't sure if we should go or not and baking the people we were at the time we decided to go we knew something was going on that weekend it something was bad and we weren't scheduled to come home till Monday cuz we had a good day Friday it was a good week but we weren't scheduled to come home till Monday and Sunday in Vegas I was sitting there with a buddy and we're at Caesars and we said we looked each other go we got to get home it's come come Sunday and talk about Tom and we decided you know it's something something's not right it just didn't feel right 15 minutes before the opening bell on Monday October 19th the New York Stock Exchange is bombarded with sell orders we came in and we were absolutely convinced they're going down five hundred million dollars worth of stocks are sold instantaneously so on Monday I come in flat I have no positions and the world isn't chaos if you can't buy I charge a fee to test our trading havens are trading their GP with Merrill Lynch coming in by side all for 95 up to the fish 5 stocks open 10% lower than Friday's close everybody wanted to sell so that meant some well-known companies couldn't even open for trading for hours Exxon the world's biggest oil company didn't begin trading for nearly two hours after the Stock Exchange open IBM was an hour and 15 minutes late chairs of Walt Disney couldn't even begin trading until 11:00 12:00 a.m. it all hinged on New York Stock Exchange I mean in today's world we have electronic trading so we don't rely on anyone exchange for that but back in 1987 it was all done manually through the specialist system and there was really no other way to get those stocks open Martin opens at 8:30 we never really get to trade because we go through an opening rotation at that time it wasn't all electronic ride like that we actually had to go through the strikes line by line by line they had never done this before it was taking it would take a half an hour to do just one like one call but we were all complaining and then and then probably an hour into the trading day everything reversed to opening rotations and brokers were just saying make me a market they didn't care what it was they said just make me a market we were quite Drupal wide or triple wide meaning that the markets you know could be like five dollars wide or something that it was and let me tell something guys want to make him markets I mean everybody's standing in the pit was making a market sometimes a broker didn't want to hear the market that they were given I mean we were stressed operationally we were stressed everywhere there were no automated execution systems people trading stock against their options positions would talk to a clerk would hand signal to a post the trade stock they were swamped 25 years ago buying his thought was not an instantaneous process a customer would begin with a phone call to his or her stock broker the broker would take the request and pass it to the firm's trading desk a call is then made to the brokerage firms booth clerk on the floor of the exchange the clerk writes down the order and passes it to the firm's floor broker the broker that walks to the trading post where the stock trades there the broker finds the specialist who finally execute the customer's order however for those with access to the technology the process is as simple as the click of a button on Monday morning in New York thousands of computer programs are triggered selling billions of dollars in stock from around the world the sound of the dot machine sounded like a machine gun particularly when volume ratcheted up everybody had to liquidate anything there was a panic going on and if you had an asset it had to be sold so that while gold was a flight to safety on Friday it was liquidated on Monday by 10:00 a.m. sell orders had reached 1 billion dollars computers on the exchange floors could not compete with those of the arbitrageurs brand selling taken to the ultimate art form as well 3 very biggest players stepped in and unloaded multibillion-dollar blocks of share once again would figure even Vidia now I put 10 bucks why pick your even busier now guys once again did you bid it off I've only been there that's an 1,100 bids Oh 5 even off we have 5 trade 70 them's our trading guys watch again here guys 70 the time trading look at the VIX up to 37 even big hit out that once again 70 W now the volume of orders overwhelms Wall Street's machines there were institution water's coming in sell 10,000 shares of XYZ and sell it now and any time you heard sell it now it set off a brain wave in you that said oh my golly if it's 10,000 out of this person what's coming behind it so there was a lot of fear and trepidation remember if you trade no expert there's no there's no hedge so the only hedge was the sp500 pit at the CMA and the SP 500 bit the markets were like $100 y-yo iax relighted out in the New York Stock Exchange and when the New York Stock Exchange wasn't orderly the OEX couldn't open in an orderly ashin the designated order turnaround system on the new york stock exchange stoles repeatedly throughout the day everything was a nightmare I mean I had spent years and years as a broker prior to this so I had a lot of feeling for my friends that were brokers they had stacks and paper this height and orders that they were trying to get filled none of the electronic systems were working nothing was up and running everything was it was just a disaster it was a total disaster 112 million shares are lost in the system four hours after the opening bell there's pandemonium on the floor 130 seeing people crying running out of the pits it was eye-opening it was it was scary pulling traders out of the crowd yelling you know you know I need to know what's going on I need to know what your positions are and it was like cash it was almost like a civil war kind of it kind of outlook yeah that's how I felt there was never any load up it was a constant barrage of selling everybody was in panic the world was in panic and um whether you were in the stock market or not you wanted to sell something anything and that was the kind of moment it was any hope of buy programs to rescue the market is gone traders who have been scrambling non-stop across the exchange floor are near exhaustion 2 o'clock in the afternoon there was a little bit of a bounce and everybody started to think is this the bottom it wasn't the seven-hour massacre ends with the Dow finishing down and inconceivable 508 points 5 times greater than the record set on the previous Friday to the end market analysts are steadfastly refusing to even mention that we're at crash to describe what's going on right now instead they'd like to look at it as a correction that still has to work itself out the market loses twenty two point six percent of its value in one day twice the percentage that any previous day in history including the crash of 1929 the day that prompted the Great Depression once the bell rang at four o'clock they couldn't get out the backlog was really basically people like yourself individual investors who said gee I put in an order at three o'clock to sell this stock did I sell my son I haven't gotten a report yet I want to know how I stand I remember at the end of the day I sat down in the pit my legs were shaking I'm sweating profusely and I'm freaking out it what am I gonna have a job the next day these traders can clear up it's just gonna cost me anything financially is this business over with is the world coming to an end I saw two grown men leave the pit crying literally in tears they had knew they had lost everything at that point big rumors about what's going on the government's going broke that you know we're about to experience another depression I mean really it was crazy I've never seen the panic level like I saw it that day it's one of those days where don't you know it's like somebody said what days you remember my mom said you know Kennedy when he was going to go through the list and I know my list and I was a little young when Kennedy was killed so I don't remember that one but this is one you know for sure one of the things that really sticks in my headed after the close on Monday was you know a lot of the guys we were holding their heads on the stairs but one of the guys I I knew because he stood there for a while he was actually crying you know he lost everything when the bloodbath is over over 500 billion dollars of capital vanishes in a single day there were some who managed to prosper amidst the financial wreckage 33 year-old Paul Tudor Jones capitalized on the chaos of Black Monday to the tune of nearly 200 million dollars but for most Wall Street was a disaster area it was like you were living in a in a house with a lot of security and a great big foundation okay and all of a sudden an earthquake hit okay and then everything just crumbled and now you're out on the street with nowhere to live no we had to keep our money at a clearing firm they were in trouble they wouldn't let you take any money out and I mean basically it might not that it was a huge net worth I was a pretty young guy at the time but your entire net worth kind of was in that trading account I go to the bank just like everybody else because there's a line of about 15 of us there and I wanted my money in cash I didn't want to cashier's check or anything else like that because the banking system is done you give me a cashier's check to a bank that's not solvent what am I gonna do it I want to cash I stayed there until 7:30 at night with about a half a dozen other guys we never got a kiss hi if I remember correctly I left about 6 o'clock I stopped at a famous Chicago hot dog stand the Wiener circle on my way home because I live near the winner's circle because I was like I just had to get back to normalcy so I stopped the winner's circle got like a burger or dog whatever it was and nobody there cared like not one person was talking about the markets so I realized you know what this must just be isolated to my little world so I got my burger whatever that's my house my happy idea and went home across the Atlantic future UK Prime Minister Tony Blair was doing his best to quell fears of a financial panic well I don't think panics ever a very good idea and certainly not at a time like this I also think that it is true to say that the very particular collapse we've had over the last couple of days can't be there a reflection of any real economic factors but I think the real problem that were left with that anything that happens in Wall Street then reverberates right around the world when I returned to the office which was around midnight Chicago time my assistants handed me the largest largest stack of telephone calls I've ever seen in my life it was like this you know his little pink slips record a call like this the top one was Alan Greenspan he had had three calls on top he asked me the critical question will you open in the morning the next day we were couldn't sleep at all I went back to the exchange the next morning at you know whatever 2:00 in the morning there was 50 people there you know 2 3 in the morning it was jammed we never opened pretty much the next day anyway we were going through opening rotation for the next like you know day specialist on the New York Stock Exchange no longer have capital to buy stock if the panic selling continues they begged their bankers for money but are denied call my friendly bank and I called the woman on the phone and I said to her I said I think I'm gonna need 50 million dollars to pay for the inventory that we acquire today in the stock market decline and you could hear this dead silence if specialists are unable to operate a collapse in the financial system around the world is certain the orders were such a deluge that the specialist system I'm afraid to say it but it's true fail because the specialists weren't going to take this kind of hit they didn't have the money for this kind of hit before the opening on Tuesday the Federal Reserve releases a statement and they called the banks and said you've got alone these market makers the money so they can pay for these positions before the start of trading the CM e Clearing House collects margin payments from members to cover Monday's losses because to cmeek Clearing House members had not received payments fears emerged about the solvency of the CME on the CBO floor normally you have this really loud it's open outcry so you hear this huge amount of noise non-stop everybody screaming this was just are you everybody was arguing about prices that it was just arguing about what price we should open in New York two-thirds of the specialists three billion dollars of buying power had vanished before the market opens New York Stock Exchange chairman John Phelan imposes a moratorium on computer trading the market opens 7% of stocks are closed for trading imbalances make it impossible for specialists to maintain orderly markets the call basically went out for buyers and you would hold up trading in a stock if it was going to open dramatically lower the Fed stopgap measures kick in the Dow shoots up 126 points in the opening minutes and they opened up like almost limit they skyrocketed up on the opening but the crisis is far from over what happened is all the put buyers came in and pop puts I'm standing the sp500 option pip where one of the designated primary market wrinkles we had a position on it was short major market index and long sp500 futures by mid day 10 doused Ox accounting for more than half the weight of the Dow are not open for trading so the banks were getting extra credit for whatever they need it and the specialists - but the specialists were afraid to use it because there was no bottom in sight and so if there were no buyers what are they gonna use this this money that they're gonna have to pay back up someday when what it was like throwing it out the role of a specialist was is to stand there provide match buyer and seller and when buyer and seller aren't there to provide liquidity so the the price swings don't get to it wide for refusing to buy stock from incoming sellers some specialists are not acting as the buyer of last resort but yes buyer of last resort and yes realizing that the stock exchange in the SEC were the regulators of last resort as well and they were going to be all over us if we didn't perform we really couldn't trade positions are no positions good amount of capital or not it didn't matter they were panicked at that time the rumors of thee that in fact the market was going to close that New York was in close and more we heard that the Chicago Mercantile was going to close the New York Stock Exchange the heart of the world financial markets was about to stop beating I think that would have sent a very very bad message to not only public but institutional investors that if you can't keep the marketplace open it'll be even worse the day the next day the day after the day after that so I think the idea was was keep the exchange open rotate around as they do in the options markets and and other markets and see how many stocks you could keep open and keep training and see if they'd stabilize the Fed strategy has failed there is an absence of buy orders you frustrated the whole day because I'll explain why because you're standing there on one side of the pit and on the other side of the pit they open up some puts that are $200 higher than they should be and you're willing to pay you're willing to sell them 100 200 lower and you can't get any of the clearinghouses would not let you trade they were the fires that they had to put out were so big that if you were if you had no position and you were not one of their problems they didn't want you to be one of their problems Thursday it felt like we were out of business like it felt like they're just gonna shut the exchange down because there was no business the fear spreads to the Chicago Mercantile Exchange the market just like a New York kept going down and down and I I didn't know how and when or whether it would stop they are specialists widened their markets to the point where I saw stocks that were $40 bit offered at 50 but we're open what would you like to do well as someone comes in a broker comes in and says I'd like to buy these 40 calls our question back to them was which is routing answer a question with a question you want what's the market where is the stock trade you tell me where the stock is I'll tell you what the options are worth so to me I was pretty scared that this thing looks like it's melting down and that would mean that at the CME if we're still open we're gonna go to zero we're gonna go to zero if we go to zero at the end of the world and we'll be blamed for being zero it was quiet it was quiet on the Siebel floor too but there was a lot of arguing about prices so I needed a rest fit while the New York Stock Exchange's making the decision I was on the phone around noon with John family and he said to me just finish talking to the president and they are considering closing the market so I tell the firm I said send somebody over to the library to find out what has happened on previous trading halls and we have 19 people in the firm we're at war and I'm telling the our firm to send somebody over the library at 11:15 the murk is shut down MMI futures already at historical lows plunging further when options trading at the CBOE is halted a few blocks away the Chicago Board of Trade is still open here mm-my futures contracts are being traded finally Don so the rumors persist it's 10:30 it's quarter 11:00 I say finally I say be long on the halt we want to be along on the haul the better what and the New York Stock Exchange specialist demand that the entire exchange close and reopen five hundred points lower and this reason a lot of the steps weren't open is because they couldn't find buyers the specialists had bought all they were willing to buy or able to buy based on whatever their capital was and the fear was once you halt the market which was unprecedented that the market could drop and go you know another nineteen twenty nine and the market was closed for about an hour and a half so there was no broker taking independent business in the major market index that mirrored the Dow so I personally had to go over and trade in that in that pit with the New York Stock Exchange brace to shut down the Chicago Board of Trade Stan's defying a broker realizes I'm the only buyer that fit their twenty peeper I'm the only guy that has the dad's a tendency that I will buy something at the Chicago Board of Trade horizon the MMI creates the most incredible rally in the history of the financial markets you're always a buyer and always a sell there's always a pleasure by itself so I tell them 285 I mean it's just traded to 90 they're trading there's maybe a 288 bid but they know that's not really real so I gave him a 285 bit he says you own it and I go mm-hmm they trade I think they trade 287 to 88 to 89 he says I'll sell you another 50 i buy another 50 at 285 they trade to 90 to 95 and that was that occurred three minutes after the Burke had have shut down trading at travel trade occurred so what happens the rest of the day it is go straight up with an influx of 150 contracts in the major market index the MMI Rises since the MMI is so thinly traded its swords from a discount of 60 points to a premium of 12 points or if the stock was at a discount which was what happened in this case they could buy the stacks and they can sell the futures at the time the MMI is the only major index still trading with each point representing about five points in the Dow this was the equivalent of a 360 point rise in the Dow Jones Industrial Average it reaches a point where a huge profit could be made if the Dow stops they represent are available for purchase on the New York Stock Exchange and that caused the stats to reopen because all suddenly there were buyers all eyes in New York notice the rally in Chicago traders demand to buy the dow stocks that are represented in the MMI if I know that the the stocks the MMI stocks are trading at a 60 point discount to the future and buying stocks and selling futures until that relationship comes back into light it's free money if you have the guts the capital and the ability to make those trades specialist firms relent they remain open for trading a furious rally ignites catapulting the Dow skyward and suddenly the buyers came in companies were announcing buybacks there was a dramatic number of announcements out of corporations who thought their stocks were ridiculously cheap announcing buybacks and that probably had a fairly good impact as well by days in the Dow posts a record 102 point game the crash of 87 comes to an end euphoric the mood was euphoric the mood was gee I can wipe my brow and I'll live to play another day and I've kept my candy store open and I've done what I was supposed to do and since we're down and then all of a sudden becomes me start shooting him right back up it was like euphoria it hit the floor everyone's like oh my god this isn't a crash there are buyers here we found the level and it was a complete it was like the entire emotion of the pit changed as one within a five-minute span I was the only person in the firm that had access I have the badge the full Board of Trade badge I used it on the CBOE I didn't really use it on the Board of Trade but I was the only person in the firm that was fully qualified if we had not had myself on that badge we have been trading as a customer we could not have executed our orders on that day and history would have been checked once again 72 now we are 40 on October 20th 1987 at 11:23 a.m. a market meltdown was averted with the purchase of 150 MMI contracts the rumors were even more prolific after Tuesday when everybody was trying to figure out who the buyer of last resort really was was it the Fed coming in was it some major bank coming in was it some bright individual mutual fund that came in and said this is the place where I'm going to stand up and commit my capital we knew there'd be a lot of finger-pointing and that we were in for a battle of our lives in terms of where we the bad guys of the fall guys or not but at least we knew that the world didn't end our staff on the board of trade floor said that Blair had gone him and we weren't ever sure if it was Blair one of Blair's traders which ultimately thought it was Blair had gone in and started buying missile futures I was in the right place the right time I provided liquidity made an offer that was probably that was probably not too rational maybe for some other reasons that I felt that we on a halt if they're going to halt this is a good buying time Blair Blair was the man I believe who came in and said here's the level when I'm the run month one of the most successful trading firms there was obviously a brilliant guy saw the value when and bought it turned out to be beautiful but it was just amazing how you could see hope sort of come back to people's alright let's trade it's time to have some fun things kind of stabilized a little bit we actually start rallying into the rest of the week that's seat that I bought for two hundred and sixty thousand dollars is now back to three hundred and sixty thousand dollars in a couple a couple of weeks and it never sees that price again for about fifteen years or so markets are very different today we live today in an incredibly efficient marketplace with a ridiculous amount of cash remember it took a few billion dollars to move to basically move a stock market crash I mean today you know people today Apple moves more in 15 minutes nobody blinks and I think that with size and with quantity comes some kind of control it's much harder to move a market that's bigger it's like anything else you have a rowboat you can turn it on a dime you have a steamship it takes a while to get it to turn the advancement of technology has dramatically changed the world for today's traders I'm always curious with all the electronic technology we have today how would have been if we had that technology then would have been smoother would have been easier we have such a big broad deep market computers have made it so that everybody can trade now you know people talk about electronic trading and computers are making so many decisions but we can see what happens when computers either don't work correctly or they get turned off and people turn their black boxes off all of a sudden start losing liquidity and when you lose the quiddity you could have a meltdown and in the good old days you know you thought about a 30 second execution as being a marvelous execution the broker could get the order come to the post transact go back and report it to his customer gee 30 seconds long time right in the greater scheme of things I think markets are efficient you know the volatility is controlled markets are efficient I don't I don't lose sleep at night thinking the markets going to crash tomorrow how did it happen we just dismissed the fact that it could there could be a 20% gap in volatility could go into and we didn't dismiss that after that the lasting effect of the crash of 87 was the introduction of volatility skew when pricing options skew takes into account the increase in volatility when the market Falls versus the decrease of volatility when the market Rises so we have this this change this what is called skew in the option market and it was prior to 87 there wasn't there wasn't a skew in the implied prices and now there is a skew and in almost every market so the crash of 87 taught a lesson to the marketplace to crash the mini crash of 89 reinforce that and after that we've always traded with a skew I wish I had known that we should have asked you back prior to 87 but a good--nice I don't know why anybody has any fear of getting the markets I mean the markets have have pure context around risk and nothing else in life does so I feel so much more confident in the markets because they're so efficient because they're so tight that I can actually come up with statistics or statistical proof of what's of what my risk is as opposed to you know the rest of your life when you don't really know anything you you

Channel: tastytrade

Views: 722,047

Rating: 4.7525234 out of 5

Keywords: Stock Market (Literature Subject), Black Monday (Event), Finance (Industry), Stock Market Crash (Literature Subject), 1987 Market Crash, Dow Jones Industrial Average (Index), Dow Jones, Trading, Terrible Tuesday, economic depression, Depression (Literature Subject), Financial Market (Literature Subject), Market, Market makers, Tom Sosnoff, Tony Battista, tastytrade, Bill Johnston, NYSE (Stock Exchange), New York Stock Exchange, CBOE, Chicago Board Options Exchange (Stock Exchange)

Id: jLfjEMDJubg

Length: 43min 19sec (2599 seconds)

Published: Wed Aug 19 2015

Reddit Comments

[u/MDDonna]

I was there that faithful day. You would have thought the world was ending by all the despair. All the brokers had piled into the bars downtown to commiserate the doom and gloom.

[u/Bassballr1]

Awful