In the old days when a customer wanted to put in a futures or options trade, he had to call the trading floor. That changed in 1996 when the CME introduced Globex, the electronic trading platform. Most will say the change was good for the customers and bad for the trading floor. This year the CME group closed all the futures pits between New York and Chicago. While there was an uproar from the remaining floor traders, most of those futures pits had dropped below their volume thresholds a long time ago. Today there is only one futures pit left, the S&P 500 futures, the most volatile contract ever written.
It’s a hard thing to say but the old days were really not that long ago. Runners ran orders to the pit and the brokers would throw the orders on the floor so the runners could pick them up and run them back to the desk to be reported. Over time the paper orders were replaced by phone clerks flashing hand signals to buy or sell. I remember in the old south room at the board of trade when the bond pit first opened, the pit was so small and so close to the desk the clerks would just wave to the broker in the pit to buy or sell. Everyone in the room could see and hear the order. Clearly things were progressing, but there were flaws in the the process, and too much front running.
One major problem in the S&P futures was called ‘dual trading,’ meaning a broker could trade his own account while filling a customer order. In other words he could buy 50 lots for his own account and then go bid up the customer’s order to inflate the price of the S&P, pushing it in his favored direction. There were all sort of tricks that order fillers could pull on the customers and one was reading the buy and sell stops in the ‘deck.’ If there was an 800 lot buy stop the order filler would tip off the locals around him and one of the locals would bid above the market to help elect the stop price or buy in front of the order with the idea of electing the stop. Over time as volume increased the exchanges had to find a new way to buy and sell. The heads of the exchanges were not talking about expanding the pits. They were looking at an alternative called electronic trading. It scared a lot of order fillers, and locals off the floor, because there were no more orders to front run and many locals really didn’t have the skills to trade on their own. They were not there for trading; they were there for stealing.
I learned a lot back then about the do’s and don’ts of futures trading. If a customer was smart, he had a good ‘guy’ on the other end of the phone to watch over the orders. Today, all the futures are traded electronically, so most of the old problems are gone, but new problems have arisen in the form of algorithmic trading programs, which make up over 70% of the volume. The exchanges eliminated one problem and brought in another one that is even more sinister.
When I left the floor last October, after being down there for 38 years, I had a choice…Do I leave the business, or do I show people what I learned? Try and help people understand the markets from a different angle? When I opened up MrTopStep with OptionMonster, I did so because I believed in the idea of teaching, but that’s not what Jon Najarian wanted, he wanted to use MrTopStep as a sales tool, and for that I split off from the company. All of our hard work was, and remains, about showing people all the things I learned that may help them not just make money but save them from losses too.
Things have changed. Everything is interconnected, and if you take your eye off something for a second, you could miss the move. In the ‘old’ days, the playing field may not have been fair, but today the playing field is loaded up with electronic trading programs that are designed to take your money. That is why I made MrTopStep, to bring traders together to share trading ideas and to create a place where people could go to learn from other like minded traders. MrTopStep has gone a long way over the last few years and we did so by presenting the MrTopStep Bootcamp that starts next week, Monday September 14th. I used to pick the phones up for some of the largest banks, hedge funds and investment firms in the world and now I am sharing that knowledge along with several other great traders in the MrTopStep futures and options forums. We do not offer 1 trader, we offer a ‘collective’ of traders, and you can get a full 1 week look at what we do by signing up today.
There is no fluff at MrTopStep. It’s all real time, live trading, and I promise that by signing up you agree to learn more in one week than most people learn in a lifetime.
Sign Up For MrTopStep’s LIVE Trading Bootcamp!
In Asia 11 out of 11 markets are trading higher (Heng Seng +4.10%, Nikkei +7.71%) and in Europe 12 out of 12 markets are trading higher (CAC +2.42%). Today’s economic calendar includes MBA Mortgage Application, Redbook, JOLTS, Quarterly Services Survey and a 10 Yr-Note Auction.
S&P 500 MELT-UP
Our View: 1908 on Friday and 1990 as of this morning, that’s an 82 handle rally in 2 1/2 days. Is the rally due to the fact that China didn’t sell off as hard as the bears would have liked, or is the S&P back showing that it is the global leading stock index? I think it’s the latter. I am not saying the volatility is over, nor am I saying we won’t wake up and see China sharply lower and the S&P down, but this shake out squeezed out most of the shorts. Our view is to sell the rallies. The ES has gone way too far in the last few day. We may look at buying weakness later, but I think the ES has a greater chance of going down than up today.
And always remember to use stops when trading futures and options…
The All New MrTopStep Option Pro Trading Room Is Coming Soon!
- In Asia 11 out of 11 markets closed higher : Shanghai Comp. +2.29%, Hang Seng +4.10%, Nikkei 7.71%%
- In Europe 12 out of 12 markets are trading higher : CAC +2.38%, DAX +1.61%, FTSE 1.80% at 5:30 am CT
- Fair Value: S&P -136., NASDAQ -0.85 , Dow -6.74
- Total Volume: 1.86mil ESU and 10k SPU traded
- Economic calendar : MBA Mortgage Application, Redbook, JOLTS, Quarterly Services Survey and a 10 Yr-Note Auction.
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