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Joe Ritchie – An Early Trading Strategy Quant In The Option Markets

By
Oddmund Groette
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Joe Ritchie was an American investor and Options and Commodities trader that passed away in 2022. He founded Chicago Research and Trading (CRT), a quantitative investment firm, in 1977 and served as the head of Fox Rivers Partners. He later went on to sell CRT in 1993.

Joe Ritchie’s life:

He attended Wheaton College, where he studied philosophy. He graduated in 1969 and went to work as a bus driver for the Chicago Transit Authority. He later worked as a guard in the Cook County jail. At the prison, he took a new career direction when a friend gave him a book on how to make it rich trading commodities.

In 1970, he became a programmer at Arthur Andersen. It was at Arthur Andersen that he first met Steve Dosser on a project for Marshall Fields.

In 1976, he began working on the floor of the Chicago Board Options Exchange (CBOE). He worked at CBOE for just two months. However, it was at CBOE that he programmed the Black-Scholes formula into his Texas instrument.

The application of this technology led to tremendous success on the trading floor. But Joe lost interest in trading stock options and left the CBOE. Before his exit, he gave his Texas instruments calculator programmed using the Black-Scholes formula to Steve Fosset.

Fossett took advantage of the Texas Instruments calculator and made a fortune. He became the single most significant trader on the floor of the CBOE.

Still, Richie quitted the CBOE in 1976 and went back to trading futures at the Chicago Board of Trade (CBOT). He continued trading futures after he founded Chicago Research and Trading (CRT) in 1977.

CRT started trading Options as soon as the CBOT began to trade options on futures. CRT was one of the firms to start computerizing options value theory as they pioneered computer-driven trading strategies. Institutional Investor Magazine stated, “CRT rides a wave of heady profits, thanks to its computer-driven trading strategies,” in 1985.

Joe’s unique views translated into every area of his business, from how he assessed his employees to unique investment strategies. Trader Monthly said of Joe: “Joe’s ability to look ahead, not just six months but several years, is second to none.”

Joe employed traders who were able to think beyond the box. Bud Hunt, a former CFO of CRT, told the story of Joe eliminating a potential employee based on a glance at their résumé. He’d look for people who, although they didn’t have the qualifications, can think independently.

In 1993, Joe sold CRT to National Bank (now Bank of America) for $225 million. After selling CRT, he remained at Fox Rivers Partners LLC and Fox River Execution as its head.

He is known to invest in private companies in Kenya, and more recently, in Akagera Medicines — one of the country’s largest biotech companies focused on infectious diseases — specifically Tuberculosis.

Other famous traders and their trading strategies

Trading strategy quotes from Joe Ritchie:

A trader on the floor with the simplest programming calculators in 1976 instantly became a one-eyed man in the land of the blind.

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Not interested! He has three strikes on the first line, his first name is an initial, there are three Roman numerals after his last name and he has an MBA (on hiring)

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