Mike Cavanaugh found his way to the trading industry despite his degree in political science because he had a brother-in-law in the wheat pit at the CBOT. He did a summer internship working for “one of the more prolific wheat traders” and soon fell in love with the place.
He went from figuring out how to use hand signals to trade to one day finding that the pits were gone. He left the floor and tried trading on the screen, but didn’t take to it right away.
Eventually, he developed an appreciation for the natural laws of investing and trading and the relationship of risk and reward and humans and money.
In commodities he learned how to “read” the pits by working for “one of the best pit readers out there.” But things were changing faster than he could make money doing it.
He never made an error that took him out of the game. He learned that errors happen to everyone, but that if you’re a good person and do the right thing, you’ll find some other people who will do the right thing and help you out of those errors. The locals were always in it together and tried to help each other out, he said.
Around 2002 he started noticing that it was harder to make money the way he had made it. He had a loser and people helped him get out of that loser. He said he felt lucky to work with people who kept him in the game. But then he started feeling like he was taking on more risk to make less money. He left the floor and started working for a startup called MyFutures Online, helping people convert from calling orders onto the floor to pointing-and-clicking them. This made it take only a day to open an account rather than a week.
He saw the need for educating people on the value of the market, and noticed a company down the hall called OptionsXpress that was educating customers and opening lots of accounts. OptionsXpress sponsored him for his Series 7, and he eventually became a registered investment advisor, where he managed a couple of options strategies and toured the country giving educational seminars.
He is currently with Regiment Alpha, a VC fund, where he is applying his experience to invest in the next wave of opportunities in fintech.
He spoke with John Lothian for the Open Outcry Traders History Project.