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Platform: "I trade, therefore, I AM!"; Theme Song: "Atomic Dog!"
Trading: EMD, 6J, ZB
Posts: 796 since Oct 2009
your friends from the floor, and your competitors
have you (ever) had conversations on partnering or bringing them up to speed with your recent developments and perhaps joining you?
what I have noticed is the Triple A (A type personality times three) traders are so fiercy independent that they don't even share newspaper vendors on the same street corner, when they get off the trains, going to work
Actually, I'm the only one from the bond pit, that I know of, that is trading electronically. Everybody went on to try other things, and those that did try to trade off the screen, didn't last very long.
As you stated, most traders are very independent creatures that require solitude, to varying degrees. I drove downtown everyday by myself for a variety of reasons; foremost was because I had to mentally prepare for the day. When the trading day was finished, I needed time to unwind and decompress. The last thing I wanted to engage in, at either time, was conversation.
That being said, I do miss the social interaction and the physicality of the pits. This is one of the reasons I participate in this forum. Nevertheless, traders have to make their own decisions and be able to live with them. It's a very personal experience, and the trader can only depend and rely on himself, if he wants to be successful.
Platform: "I trade, therefore, I AM!"; Theme Song: "Atomic Dog!"
Trading: EMD, 6J, ZB
Posts: 796 since Oct 2009
proviso
the trader can enduldge himself and wallow in all the self congradulatory pity that one need to, just to wind himself up for the next day, hence the highly artificial life that we lead, as well as the burning of the candles at all four ends..
one can only do those things and levitate off the ground, as it were, based soley on the depths of his pockets and how long one can last, before shoveling coal for a living becomes reality, yet again.
It all boils down to one's outlook; glass half empty - glass half full. Or in the case of traders, how you approach your own theta; expire worthless - or in-the-money.
When 30yr bonds first began trading on the floor of the CBOT, no one could envision how successful the new contract would become. The pit was situated in a small annex connected to the main trading floor referred to as the South room, summarily placed there as an afterthought, adjacent to the members bathroom. To encourage traders to make a market in this new contract, a financial futures membership was created that could be purchased or leased at a relatively affordable price, which meant the pit was populated by a very young and inexperienced crowd.
The bond pit might as well had been in another country and not in the South room, because the grain traders never ventured into this foreign land. Part of the reason was logistics - there was not any room in the pit, and the existing “spots” that each trader had laid claim to, were defended as if the trader’s survival depended on it. Bond pit real estate became so coveted that traders would arrive at the exchange 3-4 hours before the market opened, just to place one of their trading cards on the floor of the pit, in order to reserve a spot.
The success of the 30 year and the financial futures complex created the need for more trading space, and in response the exchange built an addition contiguous to the CBOT building. The grain pits moved onto the new trading floor, while the financial futures complex moved into the old grain room. The bond traders were finally able to spread their wings, as they relocated to the old soybean pit.
The move to bigger quarters couldn’t have come at a more opportune time. It was 1983 and the U.S. economy was plagued by double digit inflation. Fed chairman Volker was determined to slow the rate of growth of the money supply and dramatically raised interest rates. The fed funds rate which was about 11% a few years earlier, rose to 20%. The prime rate and short term rates skyrocketed to 21.5% and the long bond was yielding around 14%. The demand for price protection in the bond market had reached critical mass, and the bond futures contract provided dealers with the optimal vehicle to hedge their risk.
The word quickly spread in the financial world, and in the Chicago neighborhoods. The bond pit was the last bastion of pure capitalism and entrepreneurship, and a place where you didn’t need a college degree or an MBA as a prerequisite for entry. It was also a place where you could make a small fortune. While the memberships had appreciated almost 10X, leases were still relatively affordable.The “golden dream” was still available to anyone who could pay the price of admission, which resulted in a continuous flow of new traders, in and out of the pit.
Steve L.'s last job before making his way to the bond pit was bagging groceries at Jewel. In many ways, Steve was the archetypal bond trader. He was a tall, athletic, Southsider, stuck in a low paying, dead end job, who had a friend or relative who was making a lot of money, at one of the exchanges. He did not have a college degree, nor any prior knowledge of the bond market, trading, or technical analysis. Yet, he was made for the bond pit. Steve was a gregarious person who quickly fit in with the other traders and brokers in the pit, and along with his physicality and willingness to “take size”, it allowed him to scale his success in a dramatic fashion. He quickly grew from a 1-10 lot trader, to one of the biggest traders in the pit, routinely trading 1000-5000 contracts at time, and experiencing seven figure intra-day equity swings.
After suffering a serious hit one day, a visibly upset Steve was sitting on the top step of the pit after the close, having just learned from his clerk, what his P&L was for the day. The legendary Charlie D, who was an even a larger trader than Steve, happened to walk by and ask Steve’s clerk why Steve was so dejected. The clerk shared Steve’s P&L with Charlie who was then overheard to sarcastically say, “ F++k, I thought he could handle dropping 2Mil, better than that!”
The first Friday of the month, when the employment statistics are released by the BLS, was either a trader’s favorite day of the month or their least favorite day. Inevitably, it was either your best or worst day that month. For the brokers in the bond pit, it was overwhelmingly their most dreaded and feared day. While the pit’s volume was almost guaranteed to be the largest of the month, the attendant volatility the report generated, disproportionately increased a broker’s risk. Many a broker’s career was ended on “unenjoyment” Friday, while there were also many personal best and personal worst P&Ls, experienced by traders on that day.
Probably the biggest loss I personally witnessed a trader incur in the bond pit, was shortly after a payroll number was released. Tom Baldwin, the largest trader in the pit, and arguably one of the largest traders in the world at the time, took a 5000 contract long position into the number. In a matter of seconds, the bonds were limit down in the front month, and Baldwin was looking at a $10 MM loss. As he tried to spread out of his position in the second month, representatives from the clearing association were literally pulling him out of the pit, so that he could write them a check to cover his losses - which Tom reluctantly did, quickly returning to the pit to continue trading out of his position.
The traders who had begun their careers in the South room were among the pioneers of financial futures. They had taken a chance, and had ventured into a new, unknown territory and were now like modern day gold miners who had struck it rich. A great many of them were now multimillionaires, and this fact was not lost on the “full members” who were still trading the relatively low volume, low volatility, grain contracts.
The grain traders wanted a piece of the pie, but the bond traders felt that the bonds belonged to them. They were the ones who had taken the fledgling bond contract from nothing and developed it into the largest futures contract in the world, and they weren't going to let an old bunch of grain traders take that away from them. The grain traders however, felt it was their exchange; after all they were full members, and even though the financial complex was generating more revenue than the grain complex, the majority of the bond traders were only associate members.
Nevertheless, many a grain trader had attempted to grab a spot in the bond pit, only to fail in their attempt, and return back to the grain room with their tail between their legs. The grain traders’ answer came in the form of 40 y.o. George Edward Seals; the 6’3”- 260lb ex-offensive/defensive lineman for the Washington Redskins, Kansas City Chiefs, and the Chicago Bears. I had stood next to George in the bean pit, in my early days at the Board, and found him to be one of the most polite and even tempered guys in the pit, yet there was no denying that his appearance was rather intimidating. After all, this guy played with Dick Butkus, the toughest and most feared Bear of all time.
George walked into the bond pit one afternoon, after the grains closed, determined to squeeze into a spot - which he did. However, once firmly ensconced in his space, he soon found out how different the bond pit was from the bean pit. The bean pit was not only a boy’s club, but it was a gentleman’s club. In the beans, orders were split-up among the locals in a fair and equitable manner, and the brokers didn’t jam you with size you couldn't handle. The guys in the bean pit wanted to see the guy standing next to him make money, and would actually let you out if you were stuck, and they were the right way. If you wanted to trade with the brokers in the bond pit on a consistent basis, you had to take whatever they gave you. If you turned them down, they would not trade with you again. Trading bonds entailed a great deal of risk, and required it’s participants to readily adapt to an intense local environment if they were to survive. George didn’t even last to the end of the week, and a grain trader never tried securing a spot in the bond pit again.
