As some of you know, I am taking a few days off in the wilds of North Carolina.

That brings to mind the wilds of the trading pits I used to inhabit in my youth.

The VIX briefly dipped below 23% this week, that is what counts for low volatility in this market. It made me think about how I used to pass the time on slower days when I was a market maker.  

Reflections of a professional options trader.

Let the Games Begin!

There is a misconception about floor trading – that it is busy and hectic all of the time.  

That is not entirely true.

When 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 what 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.

So, think of trading floors as big locker rooms since it is mostly men (and some women, like Option Pit’s Licia Leslie). 

This is a group predisposed to betting, so when the quiet comes, guys start to ginning 

Up things on which to bet. This scene was made famous in “Liar’s Poker,” the late-80s book by Micahel Lewis

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.

There was usually some sort of mildly sadistic quality to it, too. 

Since there was a steady stream of clerks who needed extra dough, there usually was always a willing taker.

Here is one of my favorites

We used to 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 …

We would throw out a couple of bids – $100, $200 – 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, back then 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.  

And most of the day was happily over.

The moral of the story is, occasionally, slow days might be better spent doing something besides trading.

To Your Trading Success,

AG