Anyone know anything about how the lumber traders work? What exchange is this traded on? I find a lot of companies who claim to be lumber traders, but don't seem to be "traders". I guess any knowledge on the subject would be beneficial.
"Lumber traders" are mostly at firms that wholesale lumber. it is traded in many different forms. There's lots of trading jobs popping up in the northwest at any given time. With housing on the decline, this may soon change. Note: this type of "trading" is mostly done via telephone negotiating prices. The exchange traded lumber is via the CME. There are very few jobs for trading lumber this way.
so is it still the basics of buying wood and holding it because you think the price will appreciate? Then you call another wholesaler and convince them to buy it at a higher price? Would a trader be the one that physically delivers the wood also?
Oh no. They usually don't take delivery of wood at all. Its almost like the forex market with no central market place, and many different products. All fx trading used to be done by phone in this fashion. The lumber traded via CME is 2 X 4's, 110,000 board feet. It is liquid enough to trade as a retail trader, but NOT as a day trader. You will get some viscious fills doing that. The contract frequently will hit its limit, and then go limit the other way the next day. Think bellies. Similar market. I used to trade it in the early 90's along with coffee. Amazing that i'm still in biz!
I was on the Merc floor late 90's until 2002. Lumber and bellies are basically the same, meaning no liquidity, older traders pushing trades to their benefit, etc. It's much like floor trading used to be, no Wall St. or hedge fund money. Expect bad fills and forget about market orders. Spreading may give you a shot, but I wouldn't try it. I never heard anything specific, but there was always a general sense that something wasn't right in these pits. Your best chance is to physically trade in the pit, rather than from a screen.
Can someone on the floor at CME describe what the lumber pit is like these days? I've seen some really bad pricing behavior and am wondering if it's bad luck, or a bad scene.
Well there is an old saying about the lumber pit and the thin liquidity. "when the phone rings, the 6 market makers burst out in laughter" forgot where i heard that one,.....