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.