Specific Topics – The O’Hare Trade
The O’hare trade. The CME has a long history based in Chicago. It all started in 1848 with eighty-three merchants that established Chicago Board of Trade (CBOT) at 101 South Water Street on April 3. Through the many evolutions, the CME was born on August 18, 2008, as shareholders approved a merger with the New York Mercantile Exchange (NYMEX) and COMEX. The Merc, CBOT, NYMEX and COMEX are now markets owned by the CME Group. This 160+ year history has yield many stories on various markets throughout the years. One of the more famous stories is a famous trading strategy developed in the the 1960s – called the O’hare trade – named after the major airport in Chicago, O’hare International Airport. So just what is the O’hare trade?
Often back then, traders would start as runners, that once they could prove themselves, in terms of understanding trading and the markets, would be promoted to trade firm capital. Most trading companies back then, which today is call proprietary trading, had trading objectives, just as we do today. We at Blue Point Trading are no different (see our Trading Programme for specifics). Traders would be expected to earn profits in trading for their firm – while not losing money (they had draw down limits back then as well).
As we know trading is an acquired skill, and not all traders were successful. A few months would go by and if the objectives were not met, or worse, their trading accounts were net negative – management would come in and place traders on probation. Get profitable or you will be fired! You simply have not developed a Trade Plan that is correct or consistently followed. We all can sense (good management will give more specific criteria) when we might get fired – you have one week! Ok, so what is a trader to do?
Along about Thursday or Friday of this final week – the situation looks bleak. Your life is about to change unless something drastic happens soon. In comes the new Trading Plan – the O’hare trade. Its actually quite simple. It has a 50% win ratio. You pick the best market direction you can and go all in with maximum leverage. If it wins – life is great. If you lose, the account is blown – your fired. Its your last potential trade – so you might as well enjoy yourself. You book a ticket to the Florida beaches, place the trade and head to the O’hare airport for a wonderful weekend in the sun. The results will be sorted out by the end of the day – its frightful to watch so why stick around. Hence the name – the O’hare trade.
Yes some traders win this and some lose – but obviously this is a trade over the long haul that will not work. Ok, so you win this month – but are you going to live a long life as a trader with this Trade Plan? The answer is no. If we see this at Blue Point Trading, yes we will make payouts in accordance to our Terms and Conditions – but you are still fired.