ChicagoTrader

Sorry that you missed my exaggerating to make a point. Actually SEC/CFTC merger has been frequently proposed, always by democrats. Also 50% margin has been at times discussed, especially after the crash of 1987 and the huge congressional outcry concerning "programmed trading". Futures were referred to as "fake securities" by members of congress. Probably the only thing that has prevented a meger has been the very strong futures exchange lobby. Given Obama's critical view on free markets and now given the relative ease with which markets can be "lost" to other regions, but particularly now with computer platform trading and the huge variety of new products, increasing futures regulation will enhance the probability that margins will be increased and traders will choose to trade elsewhere. Were not Obama, Barney Frank, etc. pushing for greater regulation of the CDS's, mortgages, "streamlining" the CFTC and SEC (sounds like merger to me) and the discussion of how markets "don't work" only recently? (when in fact it was the interruption of the free market that caused the problems in the first place). And specifically the CDS market can't be "controlled" because the Fed does not set Libor, for starters Given much tighter regulation of the futures and forex markets and the disappearence of the "Chinese Wall", the hiking of margins on these products is not so far fetched. We are to be saddled with a democratic administration, house and senate. And, I strongly distrust the idea that members of congress actually have an understanding of securities, derivatives, futures, swaps, options, etc. in the first place.

I knew Larry for the S&P pit. Larry has longevity on his side and some marketing savy. The longer you hang around this business, the better you learn that there are no shortcuts. Larry is a good guy. People have to determine what exactly they are paying for before they plunk down boatloads of money for shortcuts. At $7,000, a person could have gotten any floor member to sign them on as a floor clerk for a few months to learn. Sitting a computer or scraping out a living on the floor, it all comes form the school of hard knocks. I would tell you this "secret", recite ton yourself that there are no shortcuts. Patterns may repeat, but each trading day is a discrete independent event that has nuances. Learning the patterns is the key (and I don't mean technically necessarily).

As a Chicagoan and concerned voter who resolutely supported McCain, I frankly doubt Obama is any less corrupt than other members of the Chicago democratic machine. The governor was under arrest only one week ago. For review, Obama got his opponent knocked off the ballot to get to the IL state senate, opposed a Republican for the US senate tainted by sexual scandal, and finally ran against an unpopular political party just after a stock market crash. Yes he has "luck" and the praising media on his side as well as an increasingly stupid electorate. In my view, all this hope and change stuff is naive folly. Obama is no more "hope and change" than was Jimmy Carter, the last time we were foisted upon with this drivel. The rest of the world doesn't understand precinct politics. I went to undergrad with the governor, I know how important paying off city officials can be in this town to even get one's garbage collected. This is a one party state and has been for a long time. The United States should be renamed "The 50 Precincts of Greater Chicago". It will be run exactly the same way. And the fawning press will praise it to no end. If anybody thinks ethnic politics are any different for blacks or any other ethnic groupthan for the Irish, Italians, etc., they are living in a dream world. Obama is no different than Daley. My predicition is that Obama will make Bush look like a "reasoned" president. Hold on to your wallets and get ready to move your trading accounts offshore, the NFA/CFTC and SEC merger is coming as is 50% margin. "Chicago ain't ready for reform", said Paddy Bauler, alderman. Neither is the United States, which seems to be hungrier for media shaded corruption.

I don't pit scalp now. My only point was that there is a strategy and planning involved. The scalper generally tries to buy the bid and sell the offer. So a scalper generally gets out of trades very quickly. If a trade goes their way, the pit scalper may ride the trade for some time. To quickly get out of a losing trade, the scalper will "give up the edge" as soon as possible to liquidate the loser. Since we are all probably numbers people, I will put it this way: Let's say the market is 3 bid, 4 to 5 offered. The scalper tries to buy the 3s and sell the 4s or 5s, generally against paper (public orders give up the edge by buying the offer and selling the bid). If I buy 3's and all of a sudden, the market is 2 bid at 3, I will try to first break even by selling the 3s or selling the 2s (in the case of no paper, another local will be there). If a number comes out, I will go into it flat and wait to see what paper comes in. Customers using market orders is "great" for the scalper, it is their bread and butter! There are many varieties of scalping. Most of the time I made markets against futures options paper, managing my "greeks" (I don't mean gyros). If paper came in selling some 50 calls at 3, I would try to pay 2. If the broker is not held, I can pay 2. I add it to my position and quickly approximate my delta. If I bought 100 of the 50 calls with a delta of .33, I will sell 33 of the futures in the adjacent futues pit. Now I will quickly subtract deltas and approximate the gamma (the rate of change of the delta). Now I need to sell some premium. (you figure out quanities in your head, generally, not with a computer) If the gamma is .25 I will look to sell another option (put or call) with a net gamma of -.25 (because I am short). Preferably I will do that against paper, but if I got a good edge on the calls, I might give up that edge (if my net on the whole 2 trades is still positive) to get neutral. Then I worry about vega (call or put price change with respect to volatility), and I might wait until the pit calms down to find that out or get a clerk to do it for me. If I have accumulated too much premium, my portfolio will lose value because of time decay. So I will make sure that I am fairly neutral on the premium or slightly net short. An options "box" is entirely neutral, so I will net those out and write up a card showing my net exposure by strike. If you have a quiet time, you then work to make these portfolio adjustments. Very later on I might consider my net "rho", or my exposure to intest rates, as a function of being lent or lending money to my clearing house to carry my positions. (I wrote all of my own software to do portfolio stuff, btw, I am not some sort of antique!) When in the pit all of these calculations should be done in your head, as there is no time to fool around with calculators, etc. A good options scalper or market maker can do matrix math in that trader's head. In a crowded pit you don't have the luxury of even moving, so you get it done as best as possible. You don't leave, sometimes even to go to the restroom. That is why in the movie "Trading Places", brokers "bolt" out of the bathroom stalls to get to the pit.... I was "always ready" to make markets for any paper that came in. As a member my transaction costs were almost nill. I wasn't executing the futures, so I paid out that brokerage to someone else. It helps to grow up in the same neighborhood as a broker, go to the same grammar school, etc. This is why the floors were like old neighborhoods, a perpetual high school assemby when you knew throusands of faces. Because pit trading was so "visual" I almost never went downtown without at least recognizing someone. And I also generally recognized a lot of people on Wall St. or near the WTC (terrible outcome...) when I was in NYC, etc. As the underlying market fuctuated, I adjusted my changing delta, gamma, vega and theta accordingly. Elements of this lend themselves to institutional options trading in front of screens, too. What is different is that back in the pit, almost everything was a manual process. But as you didn't use the keyboard and screen as interfaces, I would argue pit trading was quicker and maybe even less error prone than screen trading for someone who knew what they were doing. In the meantime, I am short Euros (forex) right now...... I am enjoying it!

Hello, I am new here. I've found a great deal of great information on these forums. Anyway, I am a "vet" (as in trading). I've been involved with markets for 26 years now. I've seen a lot of things evolve. But in all these years, I've also learned that nothing is really new under the sun. One specialization that I might be able to help with is futures options trading. I made markets on the exchange floor. Yes, in ways I miss the floor. But in other ways, good riddance. On the personal side, I have three little sons and am married. I live on the north side of Chicago along Lake Michigan. For fun, sometimes I throw on a wetsuit and ride some pretty nice waves, (yes, longboarding). I've gotten rides as long as 250 yards on waves as big as six feet at my beach. The Lake can be erratic. So, when I can I travel to surf! Good trading! Tschüß !!

I was a floor broker way back when. We had a customer who would incessantly cancel orders if the price got close. We called it a "cancel if close" order or CIC. In a crowded pit, such orders were extremely frustrating and could lead to error for brokers, pit clerks, or even traders wanting to take the other side. But from the customer's perspective, sometimes the customer was really sorry he or she had canceled the buy or sell order when the trade worked. I read through this entire thread and agree with much of what has been written. I'd like to add a few antiquated, but maybe applicable ideas. OK, back on the trading floor, we never spoke of the dollars involved... maybe ever. We spoke of the number of ticks. So, applicable to forex, think of the pips. Make it into a game for yourself. Yes, you are going to make lots of pips. What does thinking only of pips do? Well, it dehumanizes the game. You know that your house gas bill costs $1,017.29 this month (if you live in a frame 110 year old house in Chicago, like I do). But if you lose $1,100.00 in a trade, you think, wow, I could have paid the gas bill with that. But if you lose 1000 pips, you might not think of it that way, because you'll make 2,000 the next trade. Secondly, have you planned your trade? Even scalpers plan their trades. In the pit, they see a "handle" hit (a 85.00 or 86.00, etc.) and expect some resistance or support. The scalper might expect some paper to come in (public orders) or stops to get hit or lifted. The scalper might know that someone was bidding or offering a few feet away, five ticks away. So, the scalper hits or lifts the paper, and quickly offsets the position with the trader a few feet away. The scalper plans his trade, knows his parameters, and knows that he is going to give away the "edge" if the his held position starts getting away from him with another market maker. So, even if you are trading a $500 account, you probably should choose your points of entry, exit, and method. My rule of thumb would be to never risk more than 1-2% on a trade, but plan to take 2.5-3 times that amount in profit. I try and experiment with different systems using a very small account so that I have "skin in the game". I make sure I am using money I don't "need" to pay the gas bill. And once I am fairly confident that my strategy works, I will move the strategy to an account where I have more "skin in the game". Even as a pit trader, I was extremely conservative and risk adverse. I have not changed that. All the best, Ryan. Confidence: it's really all about that.

About dedication to this business, I actually predate many of you doing this, I guess. The post was well put and applies to any form of trading, actually. Back when the PC was considered an expensive toy, dedication in trading meant standing still in a sweaty, crowded pit and getting poked by sharp pencils. It meant dealing with "pit politics", losing your place on a step, constant flu and getting colds from being with a few hundred of your "best friends" and spending the wee hours updating charts with pencils and rulers. Markets have good and bad times. I got started in the 1970s and today's "problems" and market swings are no different than back then. The trader divorce rate was no different and moment of silence on the floor for colleagues who had committed suicide happened then, just like now. Markets trend, sometimes they don't. Big fish sometimes become bigger, sometimes they fry. What markets pay attention to changes over time, and sometimes it all goes full cycle. Governments over-regulate, under-regulate, and then go through the same cycle all over again. If you've ever read "Reminices of a Stock Operator", you'll know what I am writing about. Trading becomes all the rage, then it becomes the "cause" of all things evil. Good thing I kept learning about IT during this whole process. Pushing a mouse may be less difficult than standing on a step for seven hours, but controlling emotions is just as challenging. Finally, schlocks selling trading systems have been around for a long time. Learn your own way and planning what you'll do and how is the best advice of the post. Enjoy the ride.