V.11:6 (235-242): Through the Years: Jim Yates Of Dyr Associates by Thom Hartle

Through the Years: Jim Yates Of Dyr Associates by Thom Hartle

As an options market analyst with a quarter century in the securities business, Jim Yates takes us back to when the listed options markets first began. Yates is president of DYR Associates, an investment research firm that publishes daily and weekly reports analyzing the option market and its stock market implications. The reports are read by more than 10,000 brokers at more than 30 firms. Not only that, DYR's market and sector analysis is presented on CNBC every week. Yates, author of The Option Strategy Spectrum, helped develop and is a consultant to the CBOE Options Institute, where over the years he taught more than 4,000 investment professionals.

How did you get started in the markets?

In the mid-1960s, I became interested in the stock market and studied everything I could find and decided that I wanted to be a stockbroker. I started talking to brokerage firms all over the country and finally ended up in Washington, DC, as a trainee for Hornblower & Co., went to work as a broker in 1967, was a retail broker with Hornblower for about five years and then became an institutional broker with Wheat First Securities here in northern Virginia. I did that for a couple of years.

When did you first start studying the options market?

In the late 1960s and early 1970s, I became interested in the options market and the old over-the-counter (OTC) option base. Originally, my interest in the options market came from talking to a customer who was an active trader, and I found that we could enter the options market and use options as a trading basis —not trading options themselves, but using options as a base for trading stocks. I thought the options market was going to be big. I didn't really know how I was going to participate in it, but I decided to try to work along the lines of gathering information and statistics and see what I could learn about this business.

What did you first study?

In the early days of the options business, there was a tremendous interest in option writing because option buying was considered speculative; it's the opposite of writing options, obviously, and it was considered more conservative. I proposed to an insurance company that they write options against their portfolios. The company said, If this is such a good idea, why don't you prove that it works?

So you did.

So then I started on a study to prove what happens when you write options against a portfolio. I contended that writing options would reduce risk and increase returns, so I set out to try and prove that. What I ended up with was a study that eventually became my first research product, which I called the institutional option writers index.