Bear, There's no need to be offensive. anyway, those guys probably have more Edge than us, because they can trade the spreads and they can see the order flow in the options pits better than most of us. You dont know if the guy who open the thread want to lease a seat at the nymex. At the CBOT (at least) some of the biggest traders still using those Options Pits ( for example ). There's must be a reason why people like carmona, bergkson, Bolling and the Fisher's crew still on those pits at the nymex. good trading.
Thanks for the pics, rubibond007. I opened the thread to try to get some discussion of the intraday swings in crude during pit hours. Typical days at least lately seem to be characterized by pauses in trading followed by almost instant moves of 10 to 20 ticks, without much of indication of the direction. Sometimes this is pretty much all that is going on. From the info in this thread so far, it looks like the floor is the source of much of the electronic volume during pit hours, leading to the conclusion that a lot of the volatility is due to floor trader games (pushing trades to the pivots or other levels, false breakouts, and so on). I agree that the floor traders have an edge, since they have the physical cues of activity before it starts that screen traders can only see on the charts after the fact.
You see more volume during pit hours because most people who trade nymex products generally agree to trade during those times. The guys in the pits have lost a huge part of the edge they used to hold. The order flow the see is terrible and they get information after the rest of the world does (for most things). We all get information from our computers and they have a tiny tablet PC with no room for news or analytic tools. All they have on the screen is the trading technologies market depth windows to trade whichever products they are trading. The main reason they still trade on the on the floor is because that is all they know. They like to meet up with the guys they have been trading with for years and hang out. The option pit is the only thing that is still open outcry but that will slowly go more and more electronic as time passes.
Xbot your post was exactly correct. The oil futures open outcry pit is dead alog with most open outcry futures pits except the optiosn on futures which will also die out over the next two years. The playing field as far as getting orders filled is as level as it ever has been..(YaaaYYYY!). To try and answer your question about 10 and 20 cent moves in oil that happen in a millisecond.. you must be getting hurt by these moves otherwise you would be praising them.. no one knows when those moves are going to occur except the guys who run large money i.e commodity trading advisors, hedge funds, banks, CPO's, JOhn Arnold, T. Boone Pickens, cambell.. just to name a few of the big ones!! Campbell has done over 6,000 lots in a single day in crude oil! When large orders pour in and push the prices.. they obviously move.. it's that simple. Let's see stops are hit and people get out of the way etc. which only adds to the move!Hope this helps a little.
Thanks nolajay. I sometimes get hurt, sometimes helped by the sharp moves. They are sometimes predictable in the DOM (limit order book) when the size dries up on one side of the market. I would like to be better able to predict them.
The only advice I have to offer is that you should be especially careful around Low volume.. that is usually when large orders can come in and really move the market.
people can flash orders in the DOM so be careful thiking there is a big buyer/seller at a certain number.
Pit traders/Locals do more than just "front run" large orders...the big locals are actually taking the "other side" of large institutional orders, and thats why they can move the market. I think most traders (especially those that have never been on the floor) dont really understand how the open outcry process works, and how it relates, and contributes, to the electronic markets. Guys on the floor (locals who trade big size) are taking on substantial amounts of risk, and they are moving the markets because they are trading large size, and essentially allowing major institutions to enter or exit the markets at a fair/agreed upon price. As for the original posters question, do pit traders contribute to electronic volume, the answer is YES....Do you people really think all the electronic volume is done by retail traders sitting in their "home office" trading in their bathrobe? All the substantial volume, that actually moves the market, is done by exchange members and large institutions. The pits will continue to be open until majors institutions decide to do all their business in the electronic markets. I cant really speak about the NYMEX and their pits, but you can see this whole order flow process (and how the pit and electronic markets inter-relate) if you follow the SP & ES. To give you an example, about a week or two ago the SP's gapped up on the open because their was a big option group doing substantial buying (2000+ cars in the big SP contract), they kept biding in 100-200 car lots, and the locals where basically letting them into the markets (they were selling to the option group). So the option group wants to buy the market, but someone has to let them in and take on all that risk....the guys doing that are the locals and market makers. Now, they obviously want to sell the market (to the option group) as high as possible, in order to minimize their risk. So instead of offering at 6.00, they may say offer at 6.50, 6.60, 6.70, ect...so they will essentially be shorting the market all the way up....long story short, once the option group finished all their buying the locals were basically stuck short between a 3-4 handle range up to the daily highs and forced to bid the market (cover their shorts). But you cant just liquidate 2000+ cars (2000 x 5 = #ES contracts) unless you can find someone to sellem to you....then their is another conflict, the guy that will sell them will obviously want to sell as high as possible, while the locals want to buy as low as possible (they dont want to buy the highs)....So they will play some games and also try to bid in the ES to liquidate and find some sellers. if the market is 6.00 x 6.50 they may just offer lower, 6.40, 6.30, 6.20, ect and also bid 6.00 on the ES....Or they may just sell em at 6.00 (at the bid - sometimes the only way to bring a mkt down is to sell some more)....and hopefully the market will now be 5.60 x 6.00 and 5.75 x 6.00 (ES).....and the process just continues until new paper comes to the market. And if its a paper seller, the local (whos already short and looking to cover) will do the same thing, but on the bid. As for the original posters question, why does the market just jump 10-20 cents....its probably because someone wanted to buy (or sell) and in order to get executed he had to pay up 10-20 cents....in simplistic terms, the locals letting him into the market is essentially saying "I wont sell you 100 at 6.50, I'll sell em at 6.70", then the buyer just says "alright buyem 6.70 on 100". Large players and institutions also continue to do business in the pit because they know there are other brokers and market makers who will take on the size they need to do...There are certain locals that do a lot of business with certain brokers. So if the broker has substantial size to do he can just goto that local(s) and get all his business done at a decent price with minimal slippage.....If he wants to do that business on the screen he may have to lift a handful of offers (and pay up) or bid large size and run the risk of other traders trying to front run him and not let him in. As for the poster who says pit traders have less information than guys behind the computer (because they cant fit a lot of stuff on their tablet PCs)....your forgetting that most of those guys work with a team of other traders. They are standing in the pit and talking on a headset to guys sitting upstairs in an office, they got other traders sitting at a workstation outside the trading pit, and they got clerks/runners relaying all that information back and forth between all of them.
Jsmooth -- thanks for the excellent explanation, especially of the 10-20t jumps. This makes perfect sense to me considering the types of moves that are typical -- pure electronic markets (forex for example) typically don't jump around that much (unless the spreads are wide). They can move fast but they get there a trade at a time by "running the book". In crude you often see the market pause for a while, then gap with very few trades to a new level. In a pure electronic market, most of the traders would not know to instantly move their limit orders to a new level, but on the floor (if I understand it correctly) the new price is known almost instantly (to the floor).
Most of the guys with tablets down there are strictly arbing between the floor and the screen. There are essentially helping to make the market during open outcry. Scalping pennies on lots of 10-100 contracts can bring in some serious coin if you know whats coming down the pipe. However, any fast movements or gaps during the pit session can destroy an arb account in mere seconds. Wednesdays EIA report for instance made and broke many of those guys when CLZ gapped up...