30 Dec 2022

From the Trading Pit


Jeffrey Carter has a good posting, reminiscing about his days as a trader on the Chicago Commodities Exchange.

When I was perusing Twitter I saw this video put up by Matt Kenah (PAX). He traded on the floors too. Yours truly makes an appearance at around 5:24. This was when everyone started to leave the financial pits and come to the agriculture pits since the financial pits went to the screen. If I had to guess in this video I probably had 200-500ish spreads on and probably had an outright position of 10-100 contracts. I was a midsize hog trader.

People seem to like old trading pit stories so I thought I would start to sprinkle in a few. It’s good for my memory and it helps my writing.

Living daily in the pits meant that you had to get along with people. If you look at that video, there are guys in it that are worth $50MM or more standing right next to guys that are worth less than $500k. Liberals, conservatives, and all types. All ages. Educated and uneducated. Some were born with a silver spoon in their mouth and others were not. Some were born with a horseshoe firmly implanted up their ass.

The only real commonality is no one could be employed by a traditional employer. No corporate people down there.

There were some HUGE traders in that pit that took a lot of risk. Every pit had its big traders, but in the hogs, it was just different. I had known one of them since my first day on the floor. He went from runner to phone clerk and built a fantastic business. We were not friends in the end but I respected him immensely.

When I say huge, I mean huge. Some of these guys had balls bigger than Manhattan. We’d read about traders and hedgies doing some crazy stuff but it was always with other people’s money. OPM existed on the Chicago floors but mostly it didn’t.

Imagine trading an illiquid market with a couple of thousand spreads on. Your risk was only a meager $4 per tick. Just a mere bag of shells right? Of course, the market could easily move 100 points in a day so it was big money. By the way, no customers. It was our own money like you have in your checking account.

I always joked somedays my wife shopped shamelessly at Hermes but sometimes she went to Walmart. How’d you like to be on the hook for a potential $100k swing every day? Could you sleep at night?



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