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Market Maker Downtime
The Smart Profits Report #256
Thursday, November 3, 2005
Market Maker Downtime: How to Make $1,000 On a Slow Day In the Options Pit
By Lee Lowell
Advisory Panelist, Mt. Vernon Research
The futures and options pits are usually loud, hectic and very stressful places to be. A majority of the time, you’ll see frantic traders yelling, screaming and flashing hand signals to buy and sell securities. On a busy day, many of them will not even have time to take a bathroom break, let alone catch a bite to eat.
Well, on the rare day that things get really slow in the pit, during downtime market makers come up with some very interesting things to do. Today, I thought I’d take a break from my usual educational piece and share with you some of the more fun moments I observed during my time in the option pits on the floor of the New York Mercantile Exchange (NYMEX).
When Volume’s Down, Humor’s In a Marked Uptrend
I learned never to tell them it’s your birthday - unless you’re a glutton for punishment. I usually took the day off on my birthday, not only because I feel everyone has that right to, but because of my fear of what might happen to me in the pit.
I saw it time and time again. The unsuspecting birthday boy - could be a market maker, could be a broker - is doing his job filling customer orders when all of a sudden, creeping up behind him is the sinister prankster. With everyone else watching what’s about to happen, BLAM! A plastic bag of shaving cream gets pulled over the birthday boy’s head, dousing him from top to bottom. The crowd goes wild and the roar sounds like someone just hit a home run to win the World Series. Happy Birthday!
Have you ever seen a New York City-size cockroach? Well, I have, and they’re scary. We’re talking grandpa-size, and they’re as big as rats. I never thought they could be worth more than the pleasure I’d get from stomping on them with my size-11 shoe. But, when traders take up a collection of $500 in cash for someone to eat the insect, it makes you think a little more.
I passed on the idea, but there was someone else who was up for the challenge. The money was collected, and the trader stood in the middle of the option pit that day. Three bites and it was down. First, he took off the head, crunched it up and swallowed. Midsection followed, and you could actually see some stringy things pulling apart. Finally, the rear section. Washed it down with a Coke and called it a day. That’s nice lunch money.
More Market Maker Downtime Party Tricks
How about $1,000 in cash to shave your head? Yes, another way to kill some down-time in the options pit. I added $20 to that pot. The victim (I mean broker) was a longtime member of the exchange and known for being a risk-taker. Someone went out and bought an electric razor, shaving cream and some disposables as well, to make sure it was a clean job. And it was. The guy looked like Freddy Krueger when it was over. Not a very good look for him. I heard his wife wasn’t too happy when he went home that night.
I never understood how I ended up with funny drawings on my sneakers and the back of my trading jacket until I became a more seasoned trader in the pit.
One of the brokers, who’s also been mentioned earlier in this article, would actually slink along the floor of the pit and doodle on everyone else’s shoes.
It was funny for a while, until it would happen to you. When you’re in the heat of battle making trades, you are very focused on that one task and you aren’t really aware of what might be happening to other parts of your body. I mean, catching an elbow in the eye from a fellow trader is an everyday occurrence in the pit. As well as getting spit on and stabbed in the arm multiple times with your neighbor’s pen. So, as those distractions take you away, there’s our friend drawing pictures on my shoes and jacket, and I never felt a thing. I went through many pairs of sneakers during my tenure, and it wasn’t always because they were worn out!
Those were some of the funnier moments I can recall from my time in the pits. As crazy and as stressful as it is on the exchange, everyone needs a good laugh from time to time. It helps keep you sane.
Good Trading,
Lee
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Today’s Smart Profits Cribsheet
- To follow Lee’s background in the NYMEX, catch up on his Market Maker Series with Smart Profits #241, Market Makers - Hand Signals, Stress and Million-Dollar Trades, Smart Profits #247, Fair Value Sheets: Quote, Trade and Hedge… In Less Than 30 Seconds or Smart Profits #252, How the Market Makers Lose: Uneven Trades and Open Positions.
- Also, check out the Smart Profits Glossary for definitions of terms like “market maker” or “NYMEX” found in today’s article.
>Related Articles:
- Controlled Chaos: In the Pits at the CBOE
- Market Maker Survival: The Options Pit “Caste System” Revealed
- What Market Makers Really Do
