Yo Pit Crazies,

As the VIX tickled 16% this week it made me think about how I used to pass the time on slower days when I was a market maker.

There’s a misconception about floor trading in that it is busy and hectic all of the time. That is not entirely true.

When the volatility dies down and some of the seasonal slowness comes in, the hyper group of adrenaline junkies known as floor traders find themselves with extra time on their hands and not much to do.

Sure, the market is trading and ticking but really counts is the velocity of orders hitting a trading floor at any one time. If that velocity slows to a trickle something has to give.

Think of trading floors as big locker rooms since it is mostly men (some women).  This is a group predisposed to betting so when the quiet comes guys start to come up with interesting things to bet on. This scene was made famous in Liar’s Poker in the late 80’s.

The bond trading room at Salomon Brothers had some impromptu Liar’s Poker for big bucks. Floor traders looked for more interesting things to bet on since part of the goal was to kill time.  Half of the fun was coming up with something good to bet on. Normally it had to consist of something verifiable on the floor itself. That was part of the fun.

Also there was usually some sort of mildly sadistic quality to it. Since there was a steady stream of clerks who needed extra dough there usually was always a willing taker.

Take one of my favorites. Send a clerk around to collect bids to shave their head. First some time got killed finding a clerk who would shave their head for money. You throw out a couple of bids, $100, $200 etc and no takers. Then the guys would get together and up the ante a bit, say, $500 and still nothing. Ramp it up to $1000 and then there was some interest.  After all that was a trip to Mexico so what is wrong with a shaved head anyway? One hour later the clerk comes back bald as a cue ball. Most of the day was happily over.

Eating contests were pretty popular too. Eating hot sauce or drinking a gallon of milk, stuff like that. The CBOE has this great lunch room with wall to wall windows so members could eat lunch and keep an eye on the action in their crowds.  It was one of my favorite places to have lunch (besides Ceres).

On a slow day we came up with an idea of eating a 50 piece Chicken McNugget box in one hour for $500.  I thought there was no way anyone could do that. We happened to be lucky enough to have a huge kid from the South Side clerking in the pit next to us. His boss, the broker, called him Tiny.  He was not tiny.  He took the bet like it was the easiest money he was ever going to make.

We decided to have the contest in the members lounge and I wanted to see Tiny eat the nuggets from the pit since I could not leave the DPM. He was standing by the window wolfing down those nuggets.

The first 30 minutes rolled by and he had scarfed down half of them and was looking strong.  It was impressive. 40 minutes into it he started to slow down, really slow down and now the 20 McNuggets left looked as big as baseballs to Tiny. He sipped some milk. That was a bad idea because at about minute 50 he could not eat one more. I know because he tried to eat one more and out they all came all over the members lounge window. It was spectacular. Only 1 hour to go in the day and the close looked like it was heating up.

To leave you with a trading note, be careful fading quiet market as things can change in a hurry once some liquidity starts to show up.

To Your Trading Success,

AG