This is a re-typed version of the excerpt from the actual
newspaper article of Oct 14, 1988, for simplicity of reading
Black Monday Wasn't Black For Everyone - Options Traders Win
By PRISCILLA LISTER
San Diego Daily Transcript City Editor
Friday, October 14, 1988
The stock market crash didn't hurt everybody.
In fact, some people bet on the bear and came out of Oct. 19,
1987, far richer for it.
Two of those bettors were James A. Shepherd, 33, and David V.
Blanton, 39, who with some partners made a mint on that Black
After the crash, Shepherd and Blanton formed J&D Commodities
and have become commodities traders in La Jolla who buy options on
futures contracts. Last year they had specifically traded on the
S&P 500 Index.
Before Black Monday, Shepherd and Blanton had bought put options
that expired the third week in December on the S&P 500 Index
that gave them the right to sell those contracts at 270 points. Then
the market collapsed Oct 19 and the S&P 500 Index dropped to
about 180 points. They sold their contracts when that index averaged
210 points. While they had bought their positions at an average cost
of about $200, they sold them off at about a $30,000 net per
While they wouldn't say how many contracts they had, they did say
they had anticipated a 50-to-1 return and got even better - some 70
times their original investment. They both made millions.
Such commodity trading, especially on the S&P 500 Index, is
often called hedging, often used by institutional traders. Some
blamed the crash on the computerized program trading that used
hedging; it came under the scrutiny of the Brady Commission
following the crash, but so far no regulatory changes have altered
Such trading is also acknowledged to be highly risky; many
investors can lose their entire stakes.
And while many program traders used computerized buying and
selling of stock index futures to hedge against market losses, many
still lost money during the Crash of '87. So commodity traders, like
Shepherd and Blanton, will say it wasn't program trading that caused
"It's easy to make claims that the October situation was
caused by computer program trading and portfolio insurance firms
taking positions, "Blanton said last January. "But they
didn't cause the crash; they added to the speed but the fundamental
problems of the economy (were greater causes)." And Shepherd
added, "Had there not been portfolios to hedge, (October) could
have been worse."
They pointed out that they had paid attention to those
fundamental economic benchmarks which told them when to enter and
exit the market.
Shepherd created a computer model that has tracked influences on
the market since the late 1800s. He said it has never been wrong
since 1880. "It has never failed to track the top or bottom of
the market within a 4 percent accuracy," he told the Transcript
And just as that model is proprietary, so is his position in the
"As far as the direction of the market, we don't want to
predict," Shepherd said yesterday. "We don't make
predictions because we want to maintain our integrity with out
clients so that we don't give that information out freely anywhere
But he would say that he and Blanton have become licensed as
commodity pool operators and commodity trading advisors, and that
their firm, J&D Commodities, is currently engaged in investing
funds for both a "substantial pool and a large number of
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