I'd always heard about the "dreaded New York futures markets." Yet I have to be honest that I had a hard time understanding: What could be so terrible? Always trade limit orders, and you'll do OK.
I'd like to share two recent experiences that have changed my mind.
1) I was long Cotton about 2 wks. ago, on the day when Cotton flew up about 250 pts. I had a limit order to sell 1 contract @4484. This was a profit taking sell -- I figured it seemed like a good profit for the day, after which I could perhaps hope for a pullback, and get back on long.
Well -- what happened was cotton flew right past 4480, all the way up to 4720, which was it's daily limit. (Of course, in hindsight, I wish I never had that limit order in -- but that's the nature of the game.)
All day I waited for confirmation of that order -- but it never came. My account kept showing me still long. Perhaps, I hoped, the floor broker had miraculously lost my order.
Confirmation never came.
The next morning, I get a phone call: hofferino, we have a delayed fill for you on yesterday's cotton order. You were filled @4470. Since you were on a limit @4484, we'll make up the extra 14 points for you out of our account.
Now, I ask you: Was anything illegal done here? No -- I had the order in, and they filled it. On the other hand, what do you actually think happened here? Since when are the brokers in the habit of filling limit orders at WORSE prices, and then making up the difference?
My take: The broker misplaced my order. He was short 1 for his own account @4470. The next morning (or the afternoon before)he finds my unfilled order, and, presto -- 200+ points for free!!
Farfetched? Perhaps. But does anyone have any other plausible explanation for this? (I asked my (phone) broker, and while not wanting to admit I was right, he couldn't say I was wrong either.)
2) I was long Crude Oil. Had a limit to sell 1 @2690. I see the price trade up to 2690 three times, but never past. Hard to know if I've been filled or not.
After not receiving notification for a while, I call up my broker, who places a query to the floor broker. Says it should take a few minutes to get back to me.
I call him back an hour later. He says he never received response from the floor. Now it's too late. They've all gone home. We'll know for sure by tomorrow morning b4 markets open.
Overnight, the market comes down to, say 2650, or something. Next morning I get a phone call -- Limit @2690 --- Unable!
I know this is speculation, but, say the market had traded up to 2750 overnight -- how much you want to bet I'd have got a confirmation in the morning!?
My take: Floor sells contract @2690 and sits and waits till tomorrow morning. If price is down ---> unable. If price is up ---> fill. It's a no risk trade for him knowing he can always dump it on me.
Am I being too closed minded? Am I finding demons where they don't exist?
I realize that in neither case has anything illegal been done (at least not that I can pinpoint). All the same, I smell a fish.
Interested to hear others' opinions and experiences.
hofferino
I'd like to share two recent experiences that have changed my mind.
1) I was long Cotton about 2 wks. ago, on the day when Cotton flew up about 250 pts. I had a limit order to sell 1 contract @4484. This was a profit taking sell -- I figured it seemed like a good profit for the day, after which I could perhaps hope for a pullback, and get back on long.
Well -- what happened was cotton flew right past 4480, all the way up to 4720, which was it's daily limit. (Of course, in hindsight, I wish I never had that limit order in -- but that's the nature of the game.)
All day I waited for confirmation of that order -- but it never came. My account kept showing me still long. Perhaps, I hoped, the floor broker had miraculously lost my order.
Confirmation never came.
The next morning, I get a phone call: hofferino, we have a delayed fill for you on yesterday's cotton order. You were filled @4470. Since you were on a limit @4484, we'll make up the extra 14 points for you out of our account.
Now, I ask you: Was anything illegal done here? No -- I had the order in, and they filled it. On the other hand, what do you actually think happened here? Since when are the brokers in the habit of filling limit orders at WORSE prices, and then making up the difference?
My take: The broker misplaced my order. He was short 1 for his own account @4470. The next morning (or the afternoon before)he finds my unfilled order, and, presto -- 200+ points for free!!
Farfetched? Perhaps. But does anyone have any other plausible explanation for this? (I asked my (phone) broker, and while not wanting to admit I was right, he couldn't say I was wrong either.)
2) I was long Crude Oil. Had a limit to sell 1 @2690. I see the price trade up to 2690 three times, but never past. Hard to know if I've been filled or not.
After not receiving notification for a while, I call up my broker, who places a query to the floor broker. Says it should take a few minutes to get back to me.
I call him back an hour later. He says he never received response from the floor. Now it's too late. They've all gone home. We'll know for sure by tomorrow morning b4 markets open.
Overnight, the market comes down to, say 2650, or something. Next morning I get a phone call -- Limit @2690 --- Unable!
I know this is speculation, but, say the market had traded up to 2750 overnight -- how much you want to bet I'd have got a confirmation in the morning!?
My take: Floor sells contract @2690 and sits and waits till tomorrow morning. If price is down ---> unable. If price is up ---> fill. It's a no risk trade for him knowing he can always dump it on me.
Am I being too closed minded? Am I finding demons where they don't exist?
I realize that in neither case has anything illegal been done (at least not that I can pinpoint). All the same, I smell a fish.
Interested to hear others' opinions and experiences.
hofferino