Quote from nokomisjeff:
About 20 years ago, the wheat market was trading in a 3-5 cent range for the day. We were standing around in the pit picking off the orders, and when the orders were slow coming in, we would play around with the bids and offers, trying to pick each others pockets.
When the market was illiquid, locals would try to move the market by bidding it up or offering it down, and we could move it around a few cents pretty easily with little resistance. However most guys had a vested interest in not getting the reputation for âspearing,â which is the act of hitting the bid when someone is trying to bid the market up.
A person who practiced spearing was usually a newbie, who would try to make a quick 1/4 cent, or $12.50. This would sometimes piss us off, as a bunch of spearing could hold a market back for the short-term, believe it or not.
There was a new local who leased a seat and had never traded more than one or two contracts at a time, who would always spear you if he had a chance. By spearing, he was taking short-term gains, not looking at the big picture, and avoiding the big moves because nobody would give him more than one or two contracts. Since he never traded more than 10,000 bushels (or 2 contracts) at a whack, he wasnât a presence, but a fringe player.
However, he had an overpowering ego, was loud and obnoxious, and thought he was a big shot because he had a badgeâ¦.and was well capitalized. The only time I saw him really trade was when I was offering March wheat at 6.80. I was a quarter cent above the market and was offering it to keep a spread in line. The other players knew that I had size, and didnât want to go through me, and no one hit my offer.
We were all looking at the Chicago market, when it suddenly traded up a cent (a minute before, I had flashed my clerk and bought a large amount of WH [March Wheat] to cover a position there, and that uptick was my trade), and I offered more March wheat at 6.80. The kid hit my offer, saying âTake it.â I asked him how much he wanted, and he said, âAll you got!â I said, âSold 3,000,000 bushels (600 contracts).â
He sputtered, and said he couldnât take that much, but I told him that he owned it already, and wrote the trade on my card. He started to protest, but the pit committee guy, and time and sales ruled that it was a good trade.
You never saw the color drain out of someoneâs face as quickly as it did from his. The rest of the pit smelled blood and the other locals started offering the market down, then a couple of hedging companies started selling. The kid stood paralyzed, realizing that he had screwed up his short career in one stroke of ego.
He couldnât get out of the market, didnât have the talent to trade his way out of his predicament, and had no friends to help him out. Later, I found out that his clearing firm had to cover his trade and they ended up giving me the cold shoulder for a couple of days.
That day, at the close, I covered my whole 3,000,000 bushels about 2.4-4 cents lower, which was a great day for me. As for the kid, he never traded again in the pit. We used to see him sitting in the balcony for a few weeks, watching the action, haunting us for a while, then he disappeared completely. I wonder whatever happened to him.
