business full-time. There was a warm summerrain that day in Texas, and I remember going out for a run and deliberatelystomping in every puddle along the way.Starting a new business is not easy, but I had boundless energy for it. Iworked day and night. I must have poured in 80 hours a week during theﬁrst year. Karen and I were making babies too, so Karen was busy with thekids and could not help much except to answer the phone whenever Ineeded to run errands. I used a spare bedroom in the house as my ofﬁcefor the ﬁrst year or so, and then a custom-built ofﬁce inside the garage forabout another year. While I worked in the house I had no employees.I explored selling my software through distributors and retailers atﬁrst, but they were not interested in such a specialized program. For thatreason we have always sold direct to the customer and directly supportedour customers.At one point early in the process, when our software was geared to thesimpler needs of individual traders, I received a phone call from a Philadelphia exchange market maker named Steve Wasserstrom. He asked me ifmy software could perform some functions that he would need to supporthis professional trading. I had to admit that it could not. However, the nextday I called him back and asked if he could describe for me in more detailwhat was needed. I also asked him whether there was the potential forselling very many copies if I developed the kind of program he was askingfor and priced it reasonably. He assured me that I’d probably sell at least adozen copies in Philadelphia alone, and there were four other exchangeswhere I could sell the software as well.Necessity is the mother of invention, and with our existing softwarenot selling enough to make ends meet, I decided to go for it. In just twomonths (again, 80-hour weeks) I had the software ready. I named itProVue, and gave it a price tag of $425.Steve Wasserstrom bought his copy. Then I prepared a ﬂier to mail toall of the options market makers in the United States. I painstakingly typedin all the 2,000-plus names into my TRS-80 III and printed mailing labels.Then, with my three-year-old son helping, my family spent three days stuffing and sealing. I think the postage was more than $500. My expectationswere to sell at least 20 copies as a result of the mailing, maybe even hundreds. I was not prepared for what actually happened.We sold one. That’s it; one copy.I was devastated. While I didn’t realize it at the time, this was when Ibegan learning about the importance of name recognition. People don’tjust pop for some new product unless they’ve heard of your company before. However, at the time, I did not realize that this was the problem.Rather, I felt that no one wanted my product. So I turned my attention toanother pursuit for a while.
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I had already made a utility program for transferring ﬁles back andforth between my TRS-80 III and my IBM PC for my own use. I submittedthis program to Radio Shack’s third-party developer program, and fromthere it was passed along to a Dallas ﬁrm who agreed to publish it and payroyalties on sales. The name of this software was Let’s Talk, and it appeared on the shelves of every Radio Shack across the country for a shorttime. Unfortunately, Let’s Talk never sold very many copies, and I probablyonly realized about $1,000 in royalties.Meanwhile, several more ProVue sales trickled in from Philadelphia,so I turned my attention back to options analysis software. I kept improving the software, developed some customer contacts in New York, andwent to a couple of trade shows. I kept improving my literature and salesapproach, and even read a couple of books on sales techniques.Despite my efforts, it was always a struggle to make ends meet in thosedays. During those ﬁrst couple of years, income barely exceeded business expenses, and what was left over barely met my family’s needs. Often a copy ofthe program sold just in time to meet a payment deadline. I do not begrudgethose years, however. Karen and I grew closer to the Lord as we depended onHim so intimately for our daily bread. In those days, half of our sales came inthe mail, and we used to run to the mail box after the mailman came.Somehow, we were never late on a mortgage payment and we neverwent hungry. The credit cards got run up to the max though, and I remember many times making a quick run to the bank with even the smallest ofdeposits. My only complaint during that period was that, because of ourdebt situation, we were not able to give to the church and other worthycauses the way we would have liked.But everything was about to change in 1985. That’s about when the Investor’s Daily newspaper started. I started placing ads there, and boom—we were suddenly doing all the business we could handle. I was takingcalls all day, eating supper, and ﬁlling orders until midnight. There was notime for development work. In a short time I moved out of the house, setup an ofﬁce, and hired my ﬁrst employee—and soon after that, anotheremployee. I trained these people to do the clerical and sales work. Thatfreed me to return to the development work, a constant need for any software company, and the work I love to do.In the beginning, I was using a development system from IBM, writingcode in BASIC—a simple but adequate language. Then, sometime in 1983, Iread about a new development system from Logitech based on a languagecalled Modula 2. I bought a book on Modula 2 and soaked it up during aone-week vacation. I loved the language. It contained advanced capabilities I needed for my work. So I bought the Logitech system and put it towork immediately. It was time for a new generation of options softwareanyway, so I rewrote all the BASIC code in Modula 2 and proceeded to
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take the software up a couple of notches. It was time for our second generation of software.With most of our customer interest coming through responses to theInvestor’s Daily ad, we were hearing from individual traders much morethan professional traders. These people were asking for powerful featureslike those of our more powerful ProVue software, but not exactly. Weneeded a program that more closely met the needs of the individual trader.So, in response to this demand, I created OptionVue Plus. Now we had OptionVue Plus for the individual trader, and an updated version of ProVuefor the professional trader. OptionVue Plus sold for $695 and ProVue for$895. Both programs worked with Dow Jones for automatic price updates.Along with the higher price tag, we introduced the concept of sellingan inexpensive trial version of the software that worked for 30 days, thinking that customers would feel more comfortable buying the software afterthey had a chance to use it for a while. It’s the same approach we still usetoday. We sold almost 2,000 copies of OptionVue Plus during the ﬁve-yearlife of the product.In 1987, Karen and I moved our family, and the company, from Austin,Texas, to a Chicago suburb called Vernon Hills. We preferred the northernclimate and wanted to be closer to her folks. With the move, we renamedthe company OptionVue Systems International and incorporated it for theﬁrst time. (Actually, we named it Options Software International for ashort time, but this conﬂicted with the name of an existing company andwe were forced to choose a different name.)In September 1989 we introduced OptionVue IV—our third generationof options analysis software, and a considerable advancement in capabilities over OptionVue Plus. I’m not sure why we named it with a four, exceptthat I vaguely recall there being other software packages on the marketthat were called “three” or “four,” and we wanted to use a name thatsounded sophisticated.DOS was the operating system on the early PCs, so naturally the earlygenerations of our software were designed to run in a DOS environment.We lingered far too long in the DOS realm, however. Windows was out fornearly three years before we decided it was time to write a new, Windowsbased program. The reason for the delay was that we felt it was very important to keep coming out with improvements in the program, both tosatisfy prospective buyers and to please our existing customers. We knewthat once we began rewriting the software for Windows (and it was a complete rewrite), our users would see no upgrades for two years or more aswe spent time going sideways.In order to develop the new Windows version, we had to select a newdevelopment system. There were many available, but we narrowed itdown to just two possibilities: the Microsoft C++ Development System
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and Borland’s new Delphi System. We worked with both of these systemsfor several weeks and then made our choice. We felt that Delphi was betterbecause it used a language (Pascal) that was similar to what we were usedto (Modula 2) and it was more robust. Just about every statement that wewrote in Delphi was both more powerful and able to carry out our intentions more reliably. The Microsoft system was quirky and temperamental.Thanks to Delphi, we were able to develop the Windows version of OptionVue much faster. And it’s a good thing.OptionVue Systems nearly died before we could get the new Windowsversion developed. Yet somehow our sales reps were able to keep generating just enough interest in the DOS version to keep us alive. I had an engineer helping me with development through this effort. Scott Frank, ayoung man from Texas, moved up to the “great white north” to join us.Scott and I must have put in 50-hour weeks together for the two and a halfyears it took to develop OptionVue 5, our company’s fourth and currentgeneration of options analysis software.It turns out that instead of going sideways, OptionVue 5 was a signiﬁcant advancement over OptionVue IV. Just about every area of the software was redesigned to be more streamlined and powerful. OptionVue 5was introduced in December 1997 and has since been upgraded throughmore than 40 new releases containing hundreds of feature enhancements.It is still our company’s main product.Over the years, we have added a market quote service (DataVue), an online service for scanning the market for trading opportunities (OpScan), newinterfaces with outside data vendors, educational materials in many formats,and a full-scale options-oriented web site. Just recently, we launched a newoffshoot company called OptionVue Research that provides online optionsanalysis tools, daily trading advice, and money management services.There is a lot more I could write about the company’s achievements, especially in recent years as the staff has grown and the pace of change hasquickened. But rather than go into all these details, I’d like to share aboutsome of the people I’ve had the pleasure of meeting and working with.I’ve met a lot of interesting people over the years. For instance, when OptionVue was just starting out, Karen and I traveled to New York to display oursoftware at a trade show. All we had was a table on which to spread out ourliterature. At the next table, also at one of their company’s ﬁrst trade showsever, were Steve Achelis and his wife. They were handing out brochuresabout Steve’s new MetaStock program. We shook hands and traded copies ofour software. Over the years, Steve and I have collaborated on many projectsand have always held each other in high regard. MetaStock grew to becomeone of the most popular technical analysis programs ever. (Note that Stevesold his company a few years ago and is no longer working there.)One person who had a big inﬂuence on OptionVue’s products, and con-
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tributed to our success, was Geert Strubbe of Belgium. He has faithfullyrepresented our products throughout Europe for more than 10 years,teaching people how to trade options using the OptionVue software.More recently, we’ve started a relationship with Paul Wise in Australia. He also teaches people how to trade options and represents ourproducts there.Another Paul who played a role in our company’s history is PaulForchione. Paul worked at OptionVue for a brief period as a sales rep,before going to work with David Caplan at Opportunities In Options andthen striking out on his own. Paul teaches traders how to use our software to manage delta-neutral positions, especially in bond options.I’ve enjoyed friendly relationships with many of the educators in theoptions business. For instance, the folks at the Options Industry Counciland the Options Institute, like Jim Bittman, Marty Kerney, and others. Alsoindependents like Larry McMillan, Larry Connors, Ken Trester, BernieSchaefer, Rance Masheck, Jon Najarian, George Fontanills, John Sarkett,and Sheldon Natenberg, as well as principals David Krell and Gary Katz atthe ISE. I also have fond memories of Jim Yates (deceased), David Caplan(no longer in the business), and Marc Clemons, who used to write for ournewsletter and help us put on options trading seminars. All of these people, and others not mentioned, have contributed to my success in untoldways, with ideas, encouragement, referrals, and collaboration on businessendeavors. I’m eternally grateful.I’ve even enjoyed friendly relationships with most of our competitors,while they lasted. Note that we never had thoughts of eliminating any competition, but simply remained focused on pouring excellence into our ownproducts and services. I’d like to believe that we simply outdistanced them.Over the years, the company has experienced more ups and downsthan I have mentioned. Thankfully, we have continued to grow and maintain a strong capital position, but our trust is not in the balance sheet. It isin the Lord, who sustained us during the difﬁcult times, and does to thisday. I don’t worry about the future or whether the business will continueto be successful. We’re in His hands.
BUSINESS PHILOSOPHYEngineeringI like developing software because I enjoy building logical systems that areuseful and intuitive to operate. A well-designed system extends the humancapabilities beyond one’s natural abilities—sometimes far beyond. Inshort, I like putting computers to work—doing something useful.
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To me, satisfaction increases as the power of the system increases.And the power of the system increases as various high-performance, problem-free systems are combined and brought to bear on a common problemor need. For example, a program to seek out and list the most potentiallyproﬁtable options trades would make use of algorithms to calculate margin requirements, options fair values, slippage and commissions estimates,and many other factors. The algorithms to perform these subfunctions arepowerful systems in their own right. So the strength of the system “pyramids” as you build it up, level upon level.I like providing practical solutions to real-life needs. In the ﬁnancialrealm, traders need more than theory—they need tools that will help themmake money. That’s why we’ve always geared the company’s products andservices to the needs of real traders.
CustomersCustomer satisfaction is my greatest reward. There is nothing I enjoymore than hearing a customer say something like, “Wow, this is justwhat I was hoping to ﬁnd, and so much more!” Feedback like that iswhat keeps me going.Having started the business on a shoestring, my appreciation for thecustomer runs deep. That remains so even now that the business is largerand I have less direct contact with customers. Yet our business is stillsmall. I think some customers imagine us to be larger than we really are.While we’re growing, we have just one ofﬁce and a trim budget, so everycustomer is important to us ﬁnancially.I like to think of our relationship with the customer as a partnership. Weprovide (and keep improving) the software, data, and services they need tosupport their trading. In return, customers provide us with the funds to support our operations. We also welcome feedback. We pay a great deal of attention to customer suggestions, and they are vital to our future, even though asizable and ever-present backlog keeps us from getting to some of their ideasright away. The way I see it, when a customer points out a problem or makesa suggestion, he is not only doing himself a favor, but also helping us makeour products better. He is also beneﬁting all our other customers in theprocess. It’s a win-win-win situation! That is the nature of a partnership.We enjoy providing a personal level of support and service. That iswhy we still have live people answering the phones. And that is why westill give the customer a phone call, even if they have ordered from ourweb site. When someone orders the trial package from us, a support rep isassigned to work with the customer and help them get up to speed withthe software and our services. After the ﬁnal purchase, the same rep isavailable to help them with any further needs and subscription renewals.
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EmployeesThere is a line in the movie Das Boot (a German U-boat movie) that I’llnever forget. It comes at the end of a long ordeal when one of the crewmen was able to repair the batteries and get them working again. The captain said, “You’ve got to have good men.” It’s absolutely true. You’ve got tohave good people. Not only when your company faces challenges, but atall times, it’s essential to have a higher caliber of people working with you.The people at OptionVue Systems are a higher caliber. They workhard. They work smart. They are courteous to each other as well as to ourcustomers. Every one of them has skills that go beyond my own. I appreciate their dedication and am proud of what we have accomplished together.I look forward to many more years of working together.
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Glossary
all or none (AON) order A type of order that speciﬁes the order can only be activated if the full order will be ﬁlled. A term used more in securities markets than futures markets.American depositary receipts (ADRs) Certiﬁcates issued by a U.S. bank thatrepresent foreign securities the bank holds in the country of origin. They aretraded like domestic common stock in the United States, and options are availableon many of them.American-style option A call or put option contract that can be exercised at anytime before the expiration of the contract.arbitrage The simultaneous buying and selling of the same security at two different prices on two different markets, resulting in proﬁts without risk.ask, asked price Price at which the trader making the price is willing to sell anoption or security.assignment Notiﬁcation by the Options Clearing Corporation (OCC) to a clearing member and the writer of an option that an owner of the option has exercisedthe option and that the terms of settlement must be met. Assignments are made ona random basis by the OCC. The writer of a call option is obligated to sell the underlying asset at the strike price of the call option; the writer of a put option is obligated to buy the underlying at the strike price of the put option.at-the-money (ATM) An at-the-money option is one whose strike price is equal to(or, in practice, very close to) the current price of the underlying.back month A back month contract is any exchange-traded derivativescontract for a future period beyond the front month contract. Also known asfar month.backspread A strategy that involves buying and selling a different amount of twodifferent option contracts of the same type, in the same expiration month. See alsolong backspread, short backspread.bar chart A chart used to plot price movements, with each day’s vertical bar indicating the price range.
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bear, bearish A bear is someone with a pessimistic view on a market or particular asset, who believes that the price will fall. Such views are often described asbearish.bear call spread A vertical credit spread using calls only. This is a net credittransaction established by selling a call and buying another call at a higher strikeprice, in the same expiration. It is a directional trade where the maximum lossequals the difference between the strike prices less the credit received, and themaximum proﬁt equals the credit received. Requires margin.bear put spread A vertical debit spread using puts only. A net debit transactionestablished by selling a put and buying another put at a higher strike price, in thesame expiration. It is a directional trade where the maximum loss equals the debitpaid, and the maximum proﬁt equals the difference between the strike prices lessthe debit. No margin is required.beta A prediction of what percentage a security will move in relation to an index.If a security has a beta of 1, then the position will tend to move in line with the index. A beta of 0.5 suggests that a 1 percent move in the index will cause the security price to move by 0.5 percent.Note: Beta can be misleading since it is based on past performance, which isnot necessarily a reliable guide to the future.bell curve See normal distribution.bid The price that the trader making the price is willing to pay to buy an option orsecurity.bid-ask spread The difference between the bid and ask prices of a security. Thewider (i.e., larger) the spread is, the less liquid the market and the greater the slippage.binomial pricing model An options pricing model that assumes the price of theunderlying can either rise or fall by a certain amount at each predetermined interval until expiration. See also Cox-Ross-Rubenstein.Black-Scholes pricing model An options pricing model used to compute thevalue of European-style options, invented by Fischer Black and Myron Scholes.The primary inputs are the underlying price, the strike price, the risk-free interestrate, time to expiration, and the standard deviation of the stock return.box A position created by combining a long call and a short put at one strikeprice, and a short call and a long put at another strike price, all with the same expiration.breakeven price The price(s) of the underlying at which a position breaks even(i.e., is neither proﬁtable nor unproﬁtable) at a speciﬁc point in time.broker The middleman who passes orders from investors to ﬂoor dealers, screentraders, or market makers for execution.
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bull, bullish A bull is someone with an optimistic view on a market or particular asset, who believes that the price will rise. Such views are often described asbullish.bull call spread A vertical debit spread using calls only. This is a net debit transaction established by buying a call and selling another call at a higher strike price,in the same expiration. It is a directional trade where the maximum loss equals thedebit paid, and the maximum proﬁt equals the difference between the strike prices,less the debit. No margin is required.bull put spread A vertical credit spread using puts only. This is a net credit transaction established by buying a put and selling another put at a higher strike price,in the same expiration. It is a directional trade where the maximum loss equals thedifference between the strike prices, less the credit, and the maximum proﬁtequals the credit received. Requires margin.butterﬂy A spread strategy involving three contracts of the same type at three different strike prices. A long (short) butterﬂy involves buying (selling) the loweststrike price, selling (buying) double the quantity at the central strike price, and buying (selling) the highest strike price. All options are in the same expiration month.buy write See covered call.calendar spread Also called a time spread, a calendar spread involves the simultaneous purchase and sale of options of the same type, but with different expiration dates. Horizontal debit spreads, horizontal credit spreads, diagonal debitspreads, and diagonal credit spreads are all examples of calendar spreads.call option An option contract that conveys the right to buy a standard quantityof a speciﬁed asset at a ﬁxed price per unit (the strike price) for a limited length oftime (until expiration).call ratio backspread A long backspread using calls only.canceled order A buy or sell order that is canceled before it has been executed.In most cases, a limit order can be canceled at any time as long as it has not beenexecuted. (A market order may be canceled if the order is placed after markethours and is then canceled before the market opens the following day). A requestfor cancel can be made anytime before execution.CEV (constant elasticity of volatility) The observed tendency of volatility tochange when the price of the underlying changes. For example, with most stocksand stock indexes, as prices increase, volatility declines; when prices decline,volatility increases. This negative correlation would be indicated with a negativeCEV factor.circuit breakers A system of trading halts and price limits on equities and derivative markets, designed to provide a cooling-off period during large, intraday market movements. See also trading halt.
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clearing house Ensures the ﬁnancial integrity of the futures and options contracts traded on the exchanges for which it clears. It acts as the buyer to everyclearing member seller, and the seller to every clearing member buyer. In this way,it guarantees performance of all trades it accepts. A clearing organization is alsocharged with the proper conduct of delivery procedures and the adequate ﬁnancing of the entire operation. Examples are the Options Clearing Corporation (OCC)and the Board of Trade Clearing Corporation (BOTCC).clearing member A member ﬁrm of the clearing house. While every clearingmember must also be a member of the exchange, not all members of the exchangeare members of the clearing organization. Trades of nonmembers must be eventually settled through a clearing member.closing price (range) The price (or price range) recorded during the ﬁnal moments of a day’s trading activity that is ofﬁcially designated as the “close.”closing transaction Selling a previously purchased position (or buying back apreviously sold position), effectively canceling out the position.collar A trade that establishes both a maximum proﬁt (the ceiling) and minimumloss (the ﬂoor) when holding the underlying asset. An example would be owning100 shares of a stock, while simultaneously selling a call, and buying a put. Thepremium received from the sale of the call offsets the premium due from the purchase of the put. Strike prices are often chosen at levels at which the premiums netout to zero.collateral See margin.combination A position involving puts and calls held together, either long orshort, with different strike prices and expirations, especially when the position isnot readily identiﬁable as one of the main option strategies.commission The charge paid to a broker for transacting the purchase or the saleof stock, options, or any other security. See also round turn.commodity A raw material or primary product used in manufacturing or industrial processing or consumed in its natural form.condor A strategy that includes an out-of-the-money call spread plus an out-ofthe-money put spread. Thus the strategy involves four contracts, in the same expiration, at four different strike prices. Usually, both spreads are sold, creatingcredit spreads.contract The legal agreement between the buyer and seller of a transaction, asdeﬁned by an exchange. This is also the term describing a trading unit of a futureor option.contract size The number of units of an underlying speciﬁed in a contract. Instock options the standard contract size is 100 shares of stock. In futures optionsthe contract size is one futures contract. In cash-based index options the contractsize is typically $100, $250, or $500.
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conversion A strategy that includes a long position in the underlying combinedwith a short synthetic.convertible security A security that can be converted into common stock at theoption of the security holder. Examples are convertible bonds and convertible preferred stock.cost of carry The cost of holding an asset for a period of time. It is the combination of all charges, including interest, insurance, and storage, minus any earningsthat may proceed from the holding (i.e., dividends). Note that if the asset must bepaid for in cash or requires a cash deposit that does not get to earn interest, thenthe opportunity cost of lost interest earnings must be added to the cost of carry(this is often the most important component). Positive carry means that the earnings exceed the holding costs; negative carry means that the holding costs exceedthe earnings.covered An option strategy is said to be covered when all short options are completely offset with a position in the underlying or a long option in options on thesame asset. The loss potential with such a strategy is therefore limited.covered call A strategy involving a long position in the underlying plus a short call.covered combo A strategy involving a long position in the underlying, plus ashort call and a short put.Cox-Ross-Rubinstein pricing model A binomial options-pricing model inventedby John Cox, Stephen Ross, and Mark Rubinstein.credit The amount received for placing a trade, resulting in a net inﬂow of cashinto the investor’s account.cross hedging The practice of using opposing positions (long or short) in different, yet related, assets to reduce the overall risk. For instance, holding a long crudeoil position plus a short heating oil position tends to neutralize the trader’s exposure to movement in the overall energy group. (The investor’s goal in this case maybe to play crude oil to move up relative to heating oil.)cycle See expiration cycle.day order An order to purchase or sell a security, usually at a speciﬁed price, thatis good for just the trading session in which it is given. A day order is automaticallycanceled at the close of the market if it is not ﬁlled.debit The amount the investor pays for placing a trade, resulting in a net outﬂowof cash from his accountdelivery The tender and receipt of a commodity or ﬁnancial instrument in settlement of a futures contract.delivery date The date by which a ﬁnancial instrument or commodity (or otherinstruments such as warehouse receipts or shipping certiﬁcates) must be deliveredto fulﬁll the terms of a futures contract.
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delta One of the “greeks,” delta measures the rate of change in an option’s theoretical value for a one-unit change in the underlying. Calls have positive deltas andputs have negative deltas.delta-neutral A strategy in which the deltas of the options held (plus any position in the underlying) offset one another, with the result that the position has littleto no exposure to near-term price movements (of the underlying).derivative A ﬁnancial instrument, traded on or off an exchange, whose price isderived from the value of one or more underlying securities, indexes, debt securities, commodities, other derivative securities, or any agreed pricing index orarrangement. While derivatives involve the trading of rights or obligations basedon the underlying, they do not directly transfer property.diagonal credit spread A type of calendar spread where an option