The first stock index contract was traded on February 24th, 1982 in Kansas City.
I was there.
The concept of a futures contract based on the movement of the stock market had been discussed for years.I remember thinking how great it would be to trade a contract based on the Dow.I envisioned millions of people trading it.
As good an idea as trading on the movement of the stock market was, no one could figure out how to deliver the shares of stock in the index in a viable way.At the time, all futures contracts held to expiration resulted in physical delivery.This worked well in the case of wheat, gold and bonds.
But, to make physical delivery of a stock index would have required the delivery of shares and fractional shares in 30 different stocks for the Dow and 500 stocks for the S&P, making physical delivery impossible.It was the innovation of cash settled contracts that made stock index futures trading possible.
The Kansas City Board of Trade, where I was a member, was the first exchange to file for authorization to trade these new contracts with the Commodity Futures Trading Commission.We filed for approval to trade Value Line futures, as the people at Dow Jones would not license their index for use as a futures contract until many years later.
In February 1982, we were given permission to trade Value Line futures.The New York Stock Exchange’s NYFE stock index futures contract did not trade until May 1982 and the CME’s S&P futures did not start trading until August 1982.For a few months in the spring of 1982, our Value Line contract was, not only the first stock index contract, but the only stock index futures contract available.
Shortly after we began trading this revolutionary contract, my friend Dennis Zarr, then a Vice President of Heinhold Commodities, asked me if I wanted to join him on a trip to New York.Dennis offered to introduce me to some of Heinhold’s larger New York-based clients in order for me to talk to them about the new stock index futures trading.At the time, I was not only a trader on the floor of the Kansas City Board of Trade, but the Chairman of the Exchange’s Marketing Committee.
In New York, Dennis and I visited one well-appointed office after another, talking to banks and brokers.On one of our last appointments, we met a young guy in a small, nondescript office who was leaning back in his chair with his feet on his desk.He asked me what I did and I told him I was a trader in the Value Line pit and I owned a company that did Value Line floor brokerage.He told me that he traded Value Line futures and asked for my card saying he would call me with some of his orders.
About two weeks later, he called our trading desk and gave us an order to buy 1,000 June Value Line contracts at 197.00.The market was 196.50, so his order to buy was 50 points higher than the last sale.Further, a thousand contacts was not only the largest order I had ever seen, it was over half the daily volume in one order!
My heart starts to race even now as I write this.
The order was so big that I immediately called my friend Dennis and asked him,
“Dennis, who is this Paul Tudor Jones guy, anyway?”
Wishing you success in your trading, Jeff
Copyright © 2009 by Jeff Quinto, all rights reserved
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