Tales from the Pit
A big trader saw his talent and helped him get started, but his trading wasn’t going well. His account had gone negative a couple of times and friends had kept his slim hopes alive, but he had basically given up and was going to call his parents back East to ask if they could pay for his plane ticket home. In what he thought would be his last day of trading he was bidding on six mini-bonds when a bond local stuck him with 60. He may not have had money in his account to cover the margin for six let alone the 60 when traders from the big bond pit flooded the Mid-Am after 2 p.m. There was some news on a Fed auction and the traders continued to bid up the bonds. My friend had gone from the edge of quitting and going home with his tail between his legs to sitting on a substantial winner. After being rescued by that fortuitous event he began trading spreads and a few years later was one of the larger and most successful locals in the Eurodollar pit, consistently earning seven figures a year.
While dramatic, my friend’s story is not unique. Well, not unique in Chicago’s trading community. There are many stories like it, which cannot be replicated in the new world of trading.
These conditions can create extraordinary stories.
Mark Ritchie shared the following tale. “One day a consultant asked if I could give a tour of the CBOT to a few dignitaries from Brazil. We stood in the visitor’s gallery overlooking the grain room and I explained that the madhouse was one of America’s greatest gifts,” he notes. “Every price is voiced publicly. Everyone: Bread maker, exporter or farmer is represented in that pit. No one can buy below the market price.”
He told the group, “I’ve never been to Brazil, but I can guess that when a soybean grower takes his crop to the market, he faces many stops along the way, a small fee here, small toll there, a small tax at the next point, and an occasional gift under the table. By the time he gets his beans to the market, his profit margin is highly eroded.”
His guests were surprised that someone who had never been to Brazil could describe it so accurately.
He told the group, “In America any wheat farmer can sell in that pit at the same price as everyone else. We call it, “open outcry.” It means freedom from price manipulation; freedom from oppression.”
We’ve highlighted that there is indeed crying in trading. Ritchie adds, “If you’d like to see a grown man cry, come and interview me on the day the pits close.”