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Old 05-12-2010, 11:04 PM   #26
DcifrThs
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Re: Stories from The S&P options(Chicago Merc)

im very uninformed about how trading floor memberships/badges/jackets work so this seems to be a great thread. hope you dont mind if i ask a bunch of questions.

1. so does this mean that you pay 165k for the iom badge? and what does that get you precisely? you can fill orders and be one of the guys placing orders on the floor?
2. how many of these seats are there?
3. aren't there junior traders or other non-seat owners trading on the floor? i always saw lots of people on the nyse exchange floor when i was there but the n of people appear > number of memberships.
4. in continuation of #3 above, what is required for you to take orders/make orders on the floor?
5. are the rules different for amex, nyse, merc, etc.?
6. what do jackets mean? i thought they were for what you traded. certain colors meant different assets/derivatives. but it seems there's tons of 'things' to trade out there and the definition of each jacket color would have to be umbrella-like?
7. are the jackets universal across all exchanges?
8. how are jackets disbursed? can you have a badge and no jacket or something? (again im *really* uninformed about this stuff :-( ).

thats it for now. thanks in advance.

Barron
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Old 05-12-2010, 11:22 PM   #27
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Re: Stories from The S&P options(Chicago Merc)

Founds some more info about the Merc:
http://www.pbs.org/itvs/openoutcry/trading.html

Barron a bit about the jackets on the Merc too:

http://www.pbs.org/itvs/openoutcry/trading1.html
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Old 05-12-2010, 11:55 PM   #28
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Re: Stories from The S&P options(Chicago Merc)

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Originally Posted by DcifrThs View Post
im very uninformed about how trading floor memberships/badges/jackets work so this seems to be a great thread. hope you dont mind if i ask a bunch of questions.

1. so does this mean that you pay 165k for the iom badge? and what does that get you precisely? you can fill orders and be one of the guys placing orders on the floor?
2. how many of these seats are there?
3. aren't there junior traders or other non-seat owners trading on the floor? i always saw lots of people on the nyse exchange floor when i was there but the n of people appear > number of memberships.
4. in continuation of #3 above, what is required for you to take orders/make orders on the floor?
5. are the rules different for amex, nyse, merc, etc.?
6. what do jackets mean? i thought they were for what you traded. certain colors meant different assets/derivatives. but it seems there's tons of 'things' to trade out there and the definition of each jacket color would have to be umbrella-like?
7. are the jackets universal across all exchanges?
8. how are jackets disbursed? can you have a badge and no jacket or something? (again im *really* uninformed about this stuff :-( ).

thats it for now. thanks in advance.

Barron
1. In order to make a trade on the CME trading floor, you have to have trading rights. There are different colored badges, that allow you to trade different products. The full membership is a gold badge, this allows you to trade in any pit, usually commodities. The IMM membership is a green badge, this allows you to trade currencies and interest products. Then there is a IOM membership. This badge is blue and allows you to trade index futures and options. The final badge is a GEM badge and is gray, you don't see too many of these, and I'm not sure which few products they can trade. Also if you have any membership other than GEM you can also trade any products the cheaper memberships allow, so if you have an IMM, you can trade any product the IOM members can, plus currencies. Also there are another set of badges for CBOT products, which CME owns.

2. Not really sure. But since the way memberships are traded, I think there is a limited amount.

3/4.There are many yellow coats(not yellow anymore), or clerks also working on the floor. They can place orders with brokers, but not for their own account. Brokers, like my company, trade orders for customers who have accts with various firms, Smith Barney, JP Morgan, MF Global. These orders are placed by people who do not have trading privileges, but represent customers from around the world who have been cleared to trade by their firm. I've never worked for a desk(phone clerk), so I'm not sure the exact requirements to take and place orders. Most of the big phone clerks have trading rights(a badge). I think in order to have any discretion for your customer, as a phone clerk, you have to have trading privileges. Without a badge, it limits what you can legally do as a phone clerk. I am a pit clerk, I take orders, and give them to a broker of my choice to fill. So many people are involved in taking orders, but the only ones actually trading them on the floor need to have trading rights. Brokers represent all of the customers off of the floor who trade from different cities or from an office in chicago.

5. The rules are different at each exchange.
6. A few years ago, the jackets only meant a couple of things at the CME. Gold coats were clerks, runners, and key punchers who work for members or various firms. Traders are allowed to wear any jacket they want. Initially you are given a red coat, but most buy their own. There are certain dress code rules for traders, to make a jacket acceptable, but I'm not really sure what they are. Then there are blue coats. These are employees of the CME, some are pit reporters who report the trades, some are janitors, some are with compliance, but they are employed by the CME.

A few years ago, the CME bought the CBOT and we moved to their trading floor, and the jackets changed. Now anyone can wear any coat, except CME employees, they still wear blue coats. Clerks and runners are still given a gold coat, but can now buy there own unique or company jacket if they want. Traders still wear whatever coat they want. The way it works now is each company has a unique coat. If you see two guys wearing the exact same coat, they prob work together or for the same company. Most companies make their employees wear the same color coats as them, and buy them matching coats. Some just let their clerks wear the yellow, its cheaper.

7. CME trading privileges only give you the right to trade at the CME. Many of the market makers in the SP options have both CME and CBOE trading access(purchased separately). The CME and CBOE both have an S&P option pit, and both products are basically the same, so most traders who trade SP options, trade both at the CME and across the street at the CBOE. Brokers from each exchange are very competitive to land the same big option customers from around the world.

8. Jackets are given to you the day you start working. Clerks are given gold coats, CME employees are given blue coats, and members are given red coats. There is a big coat room where you drop off and pick up your coat everyday. Once you start your job, your company usually gives you a company coat(that they paid like 200 for) and you return your gold coat to the exchange. The trading floor has a dress code that requires a jacket, a collared shirt, no jeans, and shoes must have a back on them(no sandals).
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Old 05-12-2010, 11:57 PM   #29
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Re: Stories from The S&P options(Chicago Merc)

Or basically what the guy above me said in much fewer words
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Old 05-13-2010, 02:08 AM   #30
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Re: Stories from The S&P options(Chicago Merc)

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Originally Posted by sc000t View Post
Greg Riba

I like how they lead into the interview with him talking about drugs and alcohol with a few other guys. The guy seemed like a mess, would be interesting to hear the story behind him.
One of the founders at the firm I was at knew most of the people featured in that movie. He didn't know Riba or at least wouldn't comment on him.

A lot of those guys made a killing during the dot com boom and subsequent bust.

I'd assume he made a killing on the way up but got smoked on the way down.
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Old 05-13-2010, 02:20 AM   #31
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Re: Stories from The S&P options(Chicago Merc)

I knew one guy who use to get short the SPX on Fridays and then hedged it off by buying the correct number of minis to offset. He'd collect interest on the shorts over the weekend and then buy back on Monday. He'd do this for massive size and made millions doing this until this specific practice was banned. Easy game.
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Old 05-13-2010, 03:30 AM   #32
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Re: Stories from The S&P options(Chicago Merc)

domgio, if all the futures traders are disappearing, what does the future hold for people like me who are interested in doing energy commodity futures trading as a job someday? where will the jobs in energy commodity trading be?
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Old 05-13-2010, 06:27 AM   #33
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Re: Stories from The S&P options(Chicago Merc)

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domgio, if all the futures traders are disappearing, what does the future hold for people like me who are interested in doing energy commodity futures trading as a job someday? where will the jobs in energy commodity trading be?
Futures traders aren't disappearing, they are just leaving the pits for the screens. The market making opportunities in energies futures are in Chicagao and New York for the most part while the cash and fundamental side of the business are mostly in Texas and the Southwest. But with the evolution of computerized trading anyone can do pretty much anything from pretty much anywhere.
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Old 05-13-2010, 06:32 AM   #34
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Re: Stories from The S&P options(Chicago Merc)

Quote:
The final badge is a GEM badge and is gray, you don't see too many of these, and I'm not sure which few products they can trade.
I used to have a GEM. At the time you could trade GSCI and Mexican Peso. At the time I was doing a GSCI arb trade. That was a while back though I have no idea what they can/can't trade on those now,
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Old 05-13-2010, 10:53 AM   #35
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Re: Stories from The S&P options(Chicago Merc)

ty domgio.

baseball/domgio: wouldn't gsci just fall in commodities? and peso in currencies?

Barron
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Old 05-13-2010, 11:09 AM   #36
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Re: Stories from The S&P options(Chicago Merc)

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ty domgio.

baseball/domgio: wouldn't gsci just fall in commodities? and peso in currencies?

Barron

The GEM is/was a cheap badge whose purpose was to get people into thinly traded pits. Whenever a new contract was introduced the GEM could generally trade it because they wanted bodies in the pit. The GSCI was actually a very lucrative pit for the locals. All I remember about the peso was it was thin and I never traded it myself. I remember the GEM was also allowed to trade the Russell 2000. That's not at the Merc anymore though as it moved to ICE and back in those days it was ultra thin.
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Old 05-13-2010, 04:03 PM   #37
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Re: Stories from The S&P options(Chicago Merc)

Id def like to hear some stories about the traders any fights? Super degens? Crazy happenings?
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Old 05-13-2010, 05:22 PM   #38
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Re: Stories from The S&P options(Chicago Merc)

anyone (domgio, mrbaseball?) have good blogs or books they'd recommend relating to commodity trading (energy in particular)? it seems like most people are on this forum are geared to equities but that cra.p bores the sh.it out of me.
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Old 05-13-2010, 05:28 PM   #39
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Re: Stories from The S&P options(Chicago Merc)

I've been in two full out fights on the trading floor, and one right outside of the building. I didn't get fined for any of the fights. About a year ago, there was a little scuffle in the SP futures pit. One guy got accidentally stabbed in the face with a pen. Whenever there is a fight, all eyes on the floor instantly watch, and want to know the gossip behind the fight. So everyone knew there was a scuffle in the futures, and a minute later, this guy comes out of the pit with blood coming out of a hole in his cheek. Apparently the guy was just trying to punch him, but was holding a pen in his hand, so ended up stabbing him. Most market makers in the option pit are real smart, top college educations, and a little nerdy. It's the future traders who are nuts. Many of the biggest traders didn't go to college, and many of the old traders are somewhat connected, either by family or by friends.

I've also seen about ten people have crazy seizures on the floor. These are always scary. Some traders like cocaine, and I guess cocaine can lead to seizures.

One broker, who is no longer with my company, used to trade one lots in the SP futures. He'd start off short one future. The market would rally a little, so he'd than sell two more futures to get his price average down. Futures would keep rallying and so he'd keep selling more futures. Several times, by the close, he'd be short over 100 futures, and down over 6 figures, and have to cover them before leaving the floor. To carry future positions overnight takes huge margin, so most small traders leave the floor flat at the end of each day. This guy did this same thing prob five times in his career. So a guy making like 250K a year, as a broker, would continually lose six figures in one day trading futures. It was sad to watch, and I worked right with him. So all day I would hear, "I just need the futures to go one dollar higher/lower and I'm even" well the futures, it seems, never went the way he needed them to. Also after the first couple of times he lost huge, our boss told him no more trading futures. He'd be good for a few weeks, but all of the sudden, someone from our clearing firm would come up to my boss and say,"you know he's short 140 big futures right now? they're in his face about 200K," Every time it was the same, my boss would scream at the guy, cover his futures, and tell him next time this happens he's done. Luckily the trader who always lost big, came from big money and would always get bailed out by his family. There is a lot of old money at the merc.

I've never read this book, but I've heard there are some good stories in it. http://www.flipkart.com/book/day-tra...cia/0471332658

Last edited by domgio7; 05-13-2010 at 05:40 PM.
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Old 05-13-2010, 05:55 PM   #40
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Re: Stories from The S&P options(Chicago Merc)

The trading floor is actually a lot like a high school cafeteria. There are many "cliques", there are the cool kids, the rich kids, the bullies, the Italians, the jews, the smart nerdy kids, the druggies and of course, the popular girls. And they interact a lot like these groups did in high school. Also like high school there is always gossip, word travels fast here.

I've seen so many hot young girls come down here with huge hopes, and end up get used and abused by rich traders. It always happens the same way too, I can usually tell within a week to a month which pretty girls will make it, and which ones will become the next rumor, or naked picture being sent phone to phone. But sometimes I'm surprised by certain ones, who over come the rumors and gossip, and actually end up making a career out of their good looks.
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Old 05-13-2010, 07:01 PM   #41
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Re: Stories from The S&P options(Chicago Merc)

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Id def like to hear some stories about the traders any fights? Super degens? Crazy happenings?
A friend of mine was telling me how this new trader showed up in their pit. Nobody liked him because well he was new and was basically taking a piece of their pie. One of the guys quickly grabbed him before the start of the day and handcuffed him to one of the trading stations outside of the pit as a form of hazing. Apparently he was stuck there for some period of time.
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Old 05-13-2010, 07:04 PM   #42
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Re: Stories from The S&P options(Chicago Merc)

What's the fine for punching someone? I was told it was 10 grand, but I don't know if I believed the guy.
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Old 05-13-2010, 07:23 PM   #43
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Re: Stories from The S&P options(Chicago Merc)

The fines vary depending on who was involved and the situation. Plus if you get into a second one, the fine will be even more. Ten grand is a very realistic fine for throwing a punch on the floor. The fines down here are crazy. If you get caught with food or drink on the floor, the fine is 250 for first offense, and then they raise the fines for repeat offenders. Some runners who have to go bring people food have to try and sneak food onto the floor. Sometimes like fifty mcdonalds double cheeseburgers, or ten pizzas. These guys get caught a lot, and I've known runners, who if caught with food, were fined 1,000 for one gatorade.
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Old 05-13-2010, 07:38 PM   #44
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Re: Stories from The S&P options(Chicago Merc)

ty for the stories domgio

any good stories where a guy just loses it because he's doing so badly?
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Old 05-13-2010, 08:36 PM   #45
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Re: Stories from The S&P options(Chicago Merc)

This is a very sad story about a guy I knew who traded bigger than he should have, at a time when the market was more volatile than ever
http://www.1440wallstreet.com/index....ll_on_traders/
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Old 05-14-2010, 08:17 AM   #46
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Re: Stories from The S&P options(Chicago Merc)

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anyone (domgio, mrbaseball?) have good blogs or books they'd recommend relating to commodity trading (energy in particular)? it seems like most people are on this forum are geared to equities but that cra.p bores the sh.it out of me.
Sorry I don't? I trade energies primarily for the volatility/action they provide. I try to listen to all the info I can about the fundamentals but the fundamentals don't matter to my trading and in fact a fundamental opinion would very likely be detrimental to me.
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Old 05-14-2010, 10:41 AM   #47
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Re: Stories from The S&P options(Chicago Merc)

Just watched "Episode 5" of Floored, somehow made it through the entire 11 minutes because one of my old desk brokers was featured. Looks like an insufferable flick.

I was a clerk at the CHX in '98 then at the Merc from '99-'02 and became a floor trader and worked my way up to being a market maker (backed by some other traders) a few years later. In '09 I became almost exclusively on the screens and started trading S&P minis because I always had a great read on them but couldn't due to being in interest rates. Since I've become an oil/euro guy.

In the 80s-90s there were plenty of floor traders who made 100MM+ and my old bosses were in the 200MM+ range. As OP said the options pits are filled with smart, quick guys and the futures pits tend to be local born tough and tumble Chicago guys. Those who adapted to the screens (and have since adapted to the algos/hfs/banks) are still doing well.

The Merc is a city within a city. Anything you could ever want was there, a regulated exchange and a black market all in one. Really my favorite thing about Chicago was being on the floor making money with the guys and then being able to do great things after at a reasonable time: golf in the north suburbs at noon, parties/going out. Having a badge was something of an honor until about 5 years ago.

The screens are just a hell of a lot more efficient and most of the moves these happen overnight when the mkt is thinly traded so big players can come in and push it one way or another. Then when stocks/NYSE opens in the morning stocks go to whatever price the futures dictated. Having the chance to capitalize on it is a beautiful thing. And yes, you can trade just as well from Siena, Italy, as you can from NYC these days.

In the early 2000's one of the best things about the floor were the girls who'd get jobs at 18-21 years old. Straight from high school to the pros. The Merc allowed for a ton of networking opportunities for all sorts of things.

OP good luck and keep making those wide markets!
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Old 05-16-2010, 07:31 PM   #48
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Re: Stories from The S&P options(Chicago Merc)

How often do guys on the floor get prints under parity at expiration? Have you ever known a trader to get blown out trading something "under parity" only to find out there was a corporate action the undly affecting the actual value of the option?
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Old 05-17-2010, 01:03 PM   #49
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Re: Stories from The S&P options(Chicago Merc)

domgio, great thread.

1. i heard a lot of traders would routinely **** their hot female clerks, do coke with them, and play strip poker. how common was this?

2. what type of educational background did the options traders have? did they go to ivy league schools, MIT, etc.?

3. can you tell us some baller stories of young traders who made ****load of money and lived crazy lifestyles?
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Old 05-17-2010, 01:25 PM   #50
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Re: Stories from The S&P options(Chicago Merc)

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domgio, great thread.

1. i heard a lot of traders would routinely **** their hot female clerks, do coke with them, and play strip poker. how common was this?

2. what type of educational background did the options traders have? did they go to ivy league schools, MIT, etc.?

3. can you tell us some baller stories of young traders who made ****load of money and lived crazy lifestyles?
Almost no floor trader has a degree from an ivy league school or MIT. Especially today, there's better places for them. A lot of traders don't even have a formal college degree. A lot of them got into the scene because of people they knew or their parents were traders and had access to capital / resources. As OP said, there's a lot of old money floating around.
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