Question for NYMEX, NYBOT floor traders....

R

randolphfutures

I have been considering a move from the desk to the floor. I have absolutely no experience trading on the floor. But I have arranged to take the certification classes for NYBOT (cotton, coffee), possibly NYMEX (unleaded gas). Paying $1K per month on the NYBOT is much more attractive than $18K per month on the NYMEX. Many friends, colleagues, contacts rave about trading on the floor. And I have been down several times, very exciting. But most if not all of the individuals I know started on floor, as a clerk or in some low level capacity.

Is there anyone on this forum that has the experience and can justify the costs of trading on the floor?

I understand, being there in the person will add value through execution, open outcry and visibly witnessing the actions of your counter parties, but is it worth $18K per month for lets say, the NYMEX?

From my knowledge most crude oil and natural gas traders, who focus on futures more than options, make seven figures. Would these individuals make half of what they make on floor if they moved upstairs?

Any thoughts, insight or general info would be greatly appreciated.
 
Quote from randolphfutures:

I have been considering a move from the desk to the floor. I have absolutely no experience trading on the floor. But I have arranged to take the certification classes for NYBOT (cotton, coffee), possibly NYMEX (unleaded gas). Paying $1K per month on the NYBOT is much more attractive than $18K per month on the NYMEX. Many friends, colleagues, contacts rave about trading on the floor. And I have been down several times, very exciting. But most if not all of the individuals I know started on floor, as a clerk or in some low level capacity.

Is there anyone on this forum that has the experience and can justify the costs of trading on the floor?

I understand, being there in the person will add value through execution, open outcry and visibly witnessing the actions of your counter parties, but is it worth $18K per month for lets say, the NYMEX?

From my knowledge most crude oil and natural gas traders, who focus on futures more than options, make seven figures. Would these individuals make half of what they make on floor if they moved upstairs?

Any thoughts, insight or general info would be greatly appreciated.
More...

I am a former floor trader in Chicago who like most of my colleagues, has had a difficult transition trading off the floor. The guys you know who are "making seven figures" on the floor of the NYMEX, would probably be net losers trading electronically.

Floor trading offers several distinct advantages that cannot be replicated on the screen.

First and most importantly, trades on the futures floor are not time prioritized. That means large customer orders, no matter when they are entered, stand no better chance of being filled, than the local who decides at the last moment that he too would like to buy at that price. That's what scalping is essentially, trading in front of resting orders. Or in the case of spread scalping it may be possible to buy September contracts at let's say 17 cents over where I can sell December, but simultaneously a spread order is willing to do the spread 18 cents over. By and large, spread brokers will not assume the risk of "legging" spreads, so the risk/reward for spread scalping locals is pronounced.

Almost as important is the advantage of knowing whether the bid or offer contains customer orders. You hear a lot of talk from screen traders about spoofing, cancelled orders, bots, ect. When I look at the bid/offer in ES or ZN it tells me little about the "character" of the size resting. I may think that the 1200 offered is going to be tough to take out but it may be a bot who cancels the moment an offer in a like instrument trades out or cancels. In the pit you know who's filling customer orders and if a broker is bidding "9 for 200" you can be sure there's 200 on the bid. Then as soon as another option month or market goes sellers, you have an opportunity to sell those 9's. Big edge.

Another huge variable is commissions. Even at member rates, off the floor trading is expensive. At the cheapest customer rates the cost is excruciating. I'm trigger happy so I'd be a.) happy to make net what I spend in commissions, and b) spent less with seat lease, clerk and floor commissions than I spend now in commissions, charting and office rent.

Unfortunately in Chicago, grains and meats are about the only two venues left for open out-cry. I may have to think about learning crop reports.
 
Quote from Pabst:

I am a former floor trader in Chicago who like most of my colleagues, has had a difficult transition trading off the floor. The guys you know who are "making seven figures" on the floor of the NYMEX, would probably be net losers trading electronically.

Floor trading offers several distinct advantages that cannot be replicated on the screen.

First and most importantly, trades on the futures floor are not time prioritized. That means large customer orders, no matter when they are entered, stand no better chance of being filled, than the local who decides at the last moment that he too would like to buy at that price. That's what scalping is essentially, trading in front of resting orders. Or in the case of spread scalping it may be possible to buy September contracts at let's say 17 cents over where I can sell December, but simultaneously a spread order is willing to do the spread 18 cents over. By and large, spread brokers will not assume the risk of "legging" spreads, so the risk/reward for spread scalping locals is pronounced.

Almost as important is the advantage of knowing whether the bid or offer contains customer orders. You hear a lot of talk from screen traders about spoofing, cancelled orders, bots, ect. When I look at the bid/offer in ES or ZN it tells me little about the "character" of the size resting. I may think that the 1200 offered is going to be tough to take out but it may be a bot who cancels the moment an offer in a like instrument trades out or cancels. In the pit you know who's filling customer orders and if a broker is bidding "9 for 200" you can be sure there's 200 on the bid. Then as soon as another option month or market goes sellers, you have an opportunity to sell those 9's. Big edge.

Another huge variable is commissions. Even at member rates, off the floor trading is expensive. At the cheapest customer rates the cost is excruciating. I'm trigger happy so I'd be a.) happy to make net what I spend in commissions, and b) spent less with seat lease, clerk and floor commissions than I spend now in commissions, charting and office rent.

Unfortunately in Chicago, grains and meats are about the only two venues left for open out-cry. I may have to think about learning crop reports.
More...

I enjoyed your post Pabst. I would appreciate any other insights/stories you have about the floor.
 
some do of course make hig six , low seven figs
but no way "most" do.
( unless the NYMEX floor population has radically changed in the last 10 - 15 yrs )


"From my knowledge most crude oil and natural gas traders, who focus on futures more than options, make seven figures."

:p
 
Thank you for your reply Pabst. The guys I know down there either move paper or scalp with very tight spreads.

Regarding SethArb's comment; I am strictly referring to locals. Those individuals are doing quite well trading unleaded, crude or nat gas. I was down last week. It was complete mayhem. My friend's brother has been on the floor for twelve years. Eight of those years he was a clerk. Since registering in 01' he has not made less than $600K. The latter being his first year. This year he is on pace for $1.7M. He has told me he is low on the totem pole.

Local traders, guys who have been there for a few years, who work 5 days a week, open to close are making seven figures in this market. Obviously, some make high six figs, but I would say the majority of seasoned guys on the Merc trading futures not options are doing extremely well in this market. I have no idea as to what it was like 10-15 years ago, but crude has never been at $66 a barrel. Yes, I know, factoring inflation in the early 80', it would have been $90 or so a barrel.
 
The floor population's income is predicated upon volume more than any other factor. Few locals anywhere made the dollar numbers as EuroDollar locals at the CME. Yet that was a market that traded in relatively tight ranges but with a million contracts a day changing hands. Once you combine great volume with inordinately healthy ranges like the energy complex has seen the last few years and you have the recipe for some suddenly very wealthy folks.
 
I used to work ( 1984-1992 ) as a clerk for an FCM and sometimes my duties included clerking
for metals and oil brokers , taking phone orders
holding the order book as well as customer
and local "out -trades".

I guess with the recent vol. in nymex products

the good traders are making serious $$$

I would like to ask you mr "randolphfutures"

the next time you speak to your contacts

A: what percent of the locals use ACD methodology
and clear through MBF

B: what percent of newbies down there last
more than a yr or so without "blowing out"
and if that % is alot higher for former clerks
/ brokers on the floor
 
As of matter of fact, I went out the other night with several of Mark Fisher's crew. And I am including them in my statement, "from my knowledge most crude oil and natural gas traders, who focus on futures more than options, make seven figures."

I've read the Logical Trader myself and yes, many locals employ the ACD methodology. Many of them clear of MBF Clearing due to the fact Fisher hired and trained many of them.

Obviously, new traders (in any market) will have more of a predisposition to blow themselves up than those who have been a clerk or have several years experience. All the guys I know started out as clerks, put their time in and were staked by guys who they had been working for.

Let me ask you this.

Have you ever traded as a local on the COMEX or NYMEX?
 
no ... I was never a local ...

but one of my biggest mistakes in my life

( as far as financial goes ) was not listening

to a former broker for the HUNTS ( think silver )

who told me that NYMEX was going to one day

be HUGE ... at that time ( mid 1980's perhaps )

I could not understand how a futures market

could affect spot oil pricing more than OPEC could

( and perhaps lack of risk capital to buy membership and trade also prevented me from
attempting to do this )

:(
 
Quote from Pabst:

The floor population's income is predicated upon volume more than any other factor. Few locals anywhere made the dollar numbers as EuroDollar locals at the CME. Yet that was a market that traded in relatively tight ranges but with a million contracts a day changing hands. Once you combine great volume with inordinately healthy ranges like the energy complex has seen the last few years and you have the recipe for some suddenly very wealthy folks.
More...

Good Posts Pabst. I have only been an upstairs trader. I traded for a famous Cbot floor trader. It is a different game. He did ok off the floor. Nothing like he did on the floor though. He was much happier letting me and the rest of our small group trade for him off the floor. The edge on the floor was alot bigger than most floor traders realized ---until they cam off the floor.

One thing I learned from him is that "Paper makes Paper". Volume Rules. It was THE most valuable thing I learned from him. Big money is made in big volume markets. Big Volume happens in BIG Bull markets. There can Volume in the begriming of Bear Markets. But Bear Markets in General suck for making sick dough. That is something I disagreed with at first ---because I thought I knew better. Then the Bear Market Happened in Stocks at first it was fine ---then the ranges went to shit.

Now look at Crude and Nat Gas ----look at the money they are making. Paper makes Paper. I buy the 11:00 breakout in Crude and it is easy money. Why? It is a Bull Market! If you guys were trading Stock Indexes in 99 and 2000----It was friggin silly. Easy money. The patterns were obvious. If there was not size restrictions in the Mini Spoo and Naz ---there would alot more semi retired traders.

Go with the Big Bull Market. That is a secret that most traders do not understand or know. Traders can make the market ----but many times the Markets Make the Traders ---all else being equal. If I were a pit trader. I would be in New York. If you are an electronic trader. Specialize in Oil. I have Crude up all the time. Nat Gas as well. You have the classic scenario going on. The funny money comes in Bull Markets.

By the way, I don't doubt that Nymex floor traders are killing it. What is so wild is that the Bull Market in commodities is just getting going. They tend to last 15 years. This one has been a LONG time coming and there has not been any Crude discoveries in 20 some odd years. The catalyst -----China.
 
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