Continued Ailments in the Pits

Because we like to stay close to our roots, a few of the Attain crew headed down the CME’s trading pits today to show some of the new hires around and catch up with a couple of our contacts. Our gracious guide was the affable Danny Riley of MrTopStep – a commodity futures market commentary blog and chat site for traders. As he told the story of how the pits evolved (which we wrote about during a previous visit), he paused around the Corn Futures and Options pits.

“The options pit is full, the futures pit is not,” he stated in a matter of fact fashion. “Earlier this summer, they tried to get them to switch locations, since the futures pit is bigger, but the old school futures guys refused to switch.”

We can just hear some of the old timers in the Corn pit saying, “I’ve been standing here for 35 years, no options trader is getting my spot.” The electronic trading revolution has all but killed the futures trading pits (only a handful of people in the 30yr bond pit versus the hundreds that were there back in the 90s, for example). But that raises another question in our minds – when will electronic trading deal the futures options pits the same fate?

The options pits – meaning the futures options pits – remain pretty active (and full enough where they are eyeing the rapidly thinning futures pits), mainly because there is a perception that it is easier to do complex option spreads (legs, butterflies, iron condors, credits, debits, etc.) through human interaction than it is on the so called “screen”, as the pit traders call electronic trading.  You may agree with that, until you realize that there are already complex electronic option trading platforms for options on electronic futures out there (such as emini S&P options) and the exchange manages to figure out how to match those trades just fine.

So, it isn’t entirely clear to us why certain option pits continue to see more volume than their ‘screen’ counterparts (maybe the exchange makes more off the pit traded options and has no incentive to move everyone over to the cheaper electronic versions? Or maybe there is a technology barrier yet to be scaled. Either way – Danny, aka Mr. Top Step, seems convinced that it’s an inevitability even for the options pits, believing that as technology continues to advance, the inefficiencies that continue to make the options pits a necessity will likely be eliminated.

So better get your visits to the famed Chicago trading floor in soon. The chance to see the futures pits is already nearly gone, and who knows how long you’ll have the chance for those futures options pits.

One comment

  1. Couple thoughts from a cta using the pit to trade options still. It costs less to trade in the pit since to do the same size we would need to do 5x the quantity in the eminis then in the bigs. Also, we do many spreads that are not uniform like butterflies (ratio spreads, calendar spreads, monthly to eom spreads) and these spreads cannot easily be quoted off the floor. Just a couple of thoughts. Thanks for the story about old timers on the floor still.

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Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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