Beating the Odds – Susquehanna International – Jeff Yass

Jeff Yass was always a little different from his peers — a brilliant young man taken with poker and horse racing and the power of rational decision-making. He’s used all of it to turn his company — Bala Cynwyd’s stealthy and mysterious Susquehanna International — into one of the world’s most lucrative and powerful financial firms

After college, Yass and his roommate Arthur Dantchik headed to Vegas; a couple others from Binghamton joined them. They started out with $1,600, rented a dump in a seedy section of town, and hit the gaming rooms.

“I took a lot of hard knocks,” Yass told a reporter 20 years ago about his time there. “But I learned a lot, and I had a lot of fun, too.”

He did okay, well enough to call his friend June one day to tell her: “You’re going to Paris.” She had just met a guy, a new boyfriend, who was spending the summer there. June had been on an airplane once before in her life. Yass bought her a plane ticket with his Vegas winnings.

Yass came home to New York and went to business school at NYU. He and Dantchik and other friends made cash at the track and playing poker. And now Yass was getting into trading options — a relatively new trading offshoot — on the American Stock Exchange, though he worked through brokers, not on the floor.

Then he found the perfect vehicle to run with options. In the spring of 1981, a Wall Street heavy hitter offered to set him up on the Philadelphia Stock Exchange; an established veteran betting on a young guy with unlimited potential wasn’t unusual, and a seat in Philly was far cheaper than starting in New York.

Just when the options game took off.

ON THE SIMPLEST level, an option buys time; it’s a bet made on whether a stock is going to go up or down. Suppose Microsoft is selling for $130 a share. For a very small percentage of $130, you can buy an option to buy Microsoft at, say, $140 — that’s known as a “call,” and you’re betting that the stock will go up. If it does go up to, say, $150 before your option expires, you can exercise it, buy the stock at $140, and — if you so desire — sell it at $150. If Microsoft doesn’t go up, you let the option expire, and all you’ve lost is the price of the option, the “premium.” Conversely, if you think Microsoft is going down, you can purchase the right to sell the stock at $120 — that’s a “put.” If the stock falls to $110, you can buy it at that market price and exercise your right to sell it at $120.

Here’s the beauty of options: If your analysis is right, you can make almost as much money as you would have by buying the stock conventionally. If you’re wrong, all you lose is your premium.

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  • Gary

    FYI

  • Bernice

    As a gambler, and card player I wish Jeff Yass all the luck in the world. Anyone that intelligent should always hit a hole-in-one. Good luck to you and Susquehanna.

  • Johan

    If Yass is taking credit for solving the ‘Monty Hall’ problem, I would not trust him.

  • farty

    He’s not taking credit for solving the monty hall problem. Because that would be dumb. The author was using the monty hall example as a hook to demonstrate that complex probability questions can be counter-intuitive and to make the point that these answers are obvious to somebody as smart as Jeff Yass but not to the rest of us. It was the worst part of the article, because it’s been so over used as an example that even knee-jerk brain poopers like you have heard of it.

  • deborah

    Entire article says nothing other than Mr. Yass likes Poker, something that anyone could Google. Misleading headline gives the impression the reader will discover some inside scoop. Reading your arti