I’ve been thinking of all the bad trades I’ve ever made, and a real stupid one was probably done in 1986-87 when Brezhnev died. I had been trying to buy silver for a few days in a row, and it was bid limit up for three or four days in a row. Silver looked really friendly to me, and I loved the chart. I had a bid in to buy it in case it dipped a little. I was otherwise occupied in the pit when a massive round of selling orders came in and I had to deal with that. There was no real news coming out of the market, the sell orders just appeared. I managed to squeak by in my wheat trading, making or losing a few bucks, I don’t remember which. After the closing bell, after I was checking my trading cards, Sandy the clerk came up to me and asked me what I was going to do about the silver. I said, “What silver?” She told me that silver had gone from bid limit up to offer limit down in a minute. My bid got hit, and I owned silver much higher than the market close. I owned 15 contracts, to be exact. I found this to be impossible, checked out the COMEX charts, and discovered that she was right. I got that sinking feeling in my stomach, but said, “The hell with it, it’s only money.” The next day, the metals all opened up limit down on no news….This wasn’t good. Around 11AM, the news that Brezhnev had died crossed the wire. Thankfully, the metals immediately started to trade on that news, and I got out of the silver immediately, and took my hit like a man. I might have ended the day a little poorer, but I gained some wisdom that day.
I’m going to start listing as many of my bad trades as I can think of as a public service. Perhaps some of my readers can learn not to make the same mistakes I did.
Jeff
I’d do the same thing Jeff, but who’s got time to write an encyclopaedia?
I have a question for you. When you have a seat on an exchange like Minneapolis and you’re trading wheat on the floor, how do you trade another commodity such as silver on another exchange? Do you get a special inter-exchange deal on trading costs? Do you have access to quote terminals at or near the floor?
Cheers,
George
Comment by allocator — December 26, 2007 @ 5:16 am
Since my clearing firm has a booth about 6 steps from the pit, it was easy to give the clerk an order for something at another exchange, and she’d call it in. My clearing firm has memberships on all the exchanges. The only transaction costs saved are on NFA fees. I still pay exchange fees on other exchanges, but not on Minneapolis. As far as commissions are concerned, they are negligible. The exchange itself has a big board with bid/ask, last trade quotes from all the exchanges. There’s also newswires, quote machines, and computers all over the place. Now, they trade wheat electronically side beside the open outcry system. That opens up interesting scalping opportunities.
Jeff
Comment by masteroftheuniverse — December 27, 2007 @ 12:02 am
What would you say your mistake was on this trade - just not monitoring your working order?
Comment by Matt — May 25, 2008 @ 1:53 am
My mistake was in looking at the big board and looking at the price changes, and not at the price. The price change said +20 all day until it went to -20, but I neglected to see the -20 as a minus. I thought I was still bid, when in fact, I owned the silver and was screwed. When you trade in the pit and look at the board, there’s so much information, that you have to take shortcuts, like looking at the changes. Since I did a lot of spreading, the changes were the most important thing to me as they indicated the price action. The move in silver was so sudden, that it happened in just a minute and I didn’t notice it. In fact, I should have noticed, as there was a pretty big flurry of action in the pit, much more activity than normal. I got caught up in that…..
Jeff
Comment by masteroftheuniverse — May 25, 2008 @ 7:05 pm