Monday, January 24, 2011

Lessons From The Pit

Published in 1999, Lessons From The Pit is an excellent book written by a successful eurodollar options trader shortly after he left the CME to pursue another successful career in land management.  I really LOVED the book and recommend anyone with an interest of the trading pits to buy the book as the author does an excellent job expressing his thoughts and giving the perspective of a successful pit trader.  What's wonderful about the book is that the author breaks from the cliched stereotype of a fast living pit trader and outlines in the book his Christian values from which helped him become a better trader and a better person. 

Because the author left the CME just before my time, I asked a few guys I know from the eurodollar options pit about him and one response was "he was a trader with no enemies" which is extremely rare and speaks to his integrity.  If anything, the author is quite humble and writes the book w/humility as he could certainly brag more regarding his accomplishments.  One chapter not to be missed is his description on trading during the 87 crash, it's INSANE and worth multiples of what the book will cost you.

Buy two copies as you'll want to give one to a friend. 

Three recent books

A few books of note that are worth a mention:

 Zero Sum Game was an interesting read because it dealt with the CBOT/CME merger by a high level employee at the CBOT who started at the exchange right before the merger and presumably left right after.  It doesn't deal much w/the trading pits but on the deal making of how the CME bid for CBOT and brushed off the counter bid by ICE.  The author did a great job listing a lot of the details but I felt that she was biased towards those who gave access for the book (i.e. CBOT/ICE officials) and snubbed those who didn't (i.e. CME officals).  Go ahead and buy it as it's a great reference which truly did reshape the trading industry.

 The Futures came out recently and the concept of the book is great with chapters broken down into describing different contracts, i.e. Eggs, Onions, Eurodollars, Bunds, etc....  I didn't feel like a lot of new ground was broken in the book but I certainly learned a thing or two by reading it.  Most of the book was recounting stories of various characters so it's pretty light reading and a good overview of the stories behind contracts but I don't take as fact a lot of legends which are presented as facts because people, particularly traders, get details embellished.  To be honest, I liked it but didn't love it because some chapters I felt came in weak such as the ones on Eurodollars and Bunds but that weakness was offset w/stronger chapters like Onions, Eggs and Oil.  It's also worth a buy as it's easy to jump around the book to read each chapter individually. 

The Asylum hasn't been released yet but just putting it out there as an early notice since it's available in about three weeks.  The book tells the story of NYMEX, characters at the exchange and the role in the energy markets but judging from the publisher's description it's largely a leftist hatched job on the exchange and people involved...not that it might not be deserved but there are so many cliches it's hard for me to take serious.  As the author lives in Boulder and works at the Center for Environmental Journalism, it's pretty clear how the book is going to read.  That said, I'm still gonna buy it and see if my opinion changes.

Old CBOT cards

I've got a handful of these cards which look to be used to indicate grain futures deliveries at the CBOT in 1918 and the dates straddle the WW1 Armistice! The stamps on the back were tax related to the deliveries but I don't know the full details about these cards beyond that.

Building the CBOT

These two photos are some beauties!  The top photo is the first newspaper photo of the wheat pit being built in the CBOT building in 1930.  The second photo is of the CBOT trading floor the day before it opened also in 1930.  As always, click on the photos to enlarge for detail.

S&P pit after the bell on the Crash of '87

Above is a photo I purchased from the Chicago Tribune archives which shows the S&P 500 trading pit immediately after the close bell on Monday, October 19, 1987 better known as Black Monday.  From talking to some old timers, they've mentioned to me that most of the guys they knew made money on the day of the crash which was surprising to me.  A handful of the guys in the photo are still trading 24 years later!

LIFFE serial handsignals

Again it's good to highlight a wonderful submission this time from Lee Martin who used to work on the LIFFE floor.  Lee copied this page from a LIFFE booklet on handsignals and indeed I need to correct some of the signals on as some are incorrect.  The reason why they're incorrect is that I could only find one person who could recall what he thought were the serial month signals and some were wrong so they'll be corrected ASAP. 

It might seem like a simple task to have gotten these but I've spent years and contacted a handful of ex-LIFFE workers and everyone came up blank on them, and I'm talking friends of friends who should've known but didn't. 

Trading floor pins and buttons

You'll need to click on the photo to enlarge it and read the pins better but I'm grateful for Dean Geyer for sending in the photo of what is one of the greatest if not the greatest collection of trading pins from the Chicago trading floors. The blog in the past has a few pictures of ones that I've collected but Dean's collection is much more comprehensive of the time he spent on the trading floor.  These pins were handed out at the entrance to the trading floor to commemorate contract launches, VIP visitors, milestones, etc... and as most were thrown away pretty quickly, it's rare to see such a collection and it's very nice of Dean to share his collection.  It's a nice walk down memory lane to recall when the buttons were handed out (even though most of his were before my time)!

Back for a bit

I'll give a welcome back to myself as I'm home for a week before getting back to the travels and will push out some posts that have been in the queue.   There are still a few things I have to do on for MATIF and LIFFE signals but it's getting much closer to a complete, accurate library of trading pit handsignals. 

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