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How It was: CME & CBOE Trading Floor day before Options Expiration, Markets Down 300+ PT.1

by Jeffrey Lin


The opportunity to be on both the CME pit and the CBOE trading floor yesterday, May 20th, was one of the most amazing experiences ever.  Not just as a trader, but a tourist too.  Fari Hamzei had told me if I wanted to visit the trading floor it had to be Thursday and Friday of Options Expiration week.  Options expirations week is often accompanied by accentuated moves in the market (big ups or big downs) as options players with this month’s options HAD to make a move.  It was a terrible day for the markets with the DOW down almost 400 points, so if we wanted to see the floor busy with excitement well we got it.  With big thanks to our friends Danny Riley, Brian Shepherd, and Jason Carter from MrTopstep, we were able to stay on the CME floor by the S&P trading pit for as long as we wanted – chilling and chatting with various floor traders, learning how to read the price boards overhead, and get in the pits to see how floor traders were trading different financial products.  Also, a big thanks to Andrew Coffey from OptionMonster and Russell Rhoads from the CBOE Options Institute for a tour of the CBOE trading floor.  I tweeted several updates and live pics:

When you watch shots of commentators reporting from the trading floor in a huge black stadium-like room, they’re reporting from the CME, but it is the CBOT building where the CBOT was before merging with the CME.  It is a ginormous octagon stadium with brokers and clerks on steps up against the wall.  Like a concert mosh pit, the center is an 2-level open floor with countless pits where groups of traders together to trade a specific financial product.  On the floor, the outer upper ring houses certain “pits.”  The inner lower ring houses other pits and broker stations.  Each pit trades only one product.  For example, the S&P 500 futures pit where we spent most of our time is in one of the higher pits in the outer ring.  For you Rick Santelli fans, the bond pit is on the opposite side of the S&P pit.

[adding pics & video when i get home. check back!]

We stayed at Hotel Blake – just a 5 minute walk from both the CME/CBOT building and CBOE (CME & CBOE are directly across the street from each other).  The ground floor of the CME/CBOT building has two sides, and we had gone to the wrong side but discovered that was where traders and brokers stored their floor jackets and checked in and out.  We were redirected to the other side of the building and gone up to the 4th floor where Brian Shepherd signed us.  We walked down a corridor that felt a lot like walking in a small sports or concerts stadium.  When we turned the corner, we went up some stairs and the giant stadium-like floor opened in front of us with traders and brokers up, down, left, right, and in front.  I felt like we were coming from the locker rooms and out of the tunnel onto the field.  We went between the S&P 500 futures and S&P 500 futures options pits to get to the tiny desk/computer station where Brian, Danny, Jason, and their whole crew did business.  We got there later than we thought as I was caught in my hotel watching the markets tumble down over 200 points.  By the time we reached the desk with the Mr. Topstep guys, the market was down 300 points!  There was so much to take in! The whole upper half of the wall were covered with boards showing market prices, market internals, and other data.  It took me quite a while and some help from Jason to figure out what sections of the boards showed what.  The broker desks for the Mr. Topstep guys and other brokers have less room than that flight attendants get!  The computers take up the whole desk space so these guys barely have room to put anything.  There’s probably 6 guys side by side at 6 computers sitting on stools, sandwiched between the desk in front and the next desk row behind them such that they can’t move back even if they wanted to.  Let me tell you, trading at home or in an office is tons tons more comfortable than where these guys and girls spend their days.  Some guys and girls run tickets from the desks to the pits where the trades occur, and they didn’t have anywhere to sit as they were walking back and forth all day.

[adding pics & video when i get home. check back!]

Took a walk from one side of the stadium to the other side (the bond side) to find Rick Santelli.  Danny told me Rick is a short guy, about my height, so I had to see for myself.  Rick was a very personable guy, with the same big TV smile he puts on everyday for CNBC…or it could’ve been that I found him right after his CNBC report so his smile hadn’t faded! (just kidding).  Headed back to the Mr. Topstep desk in time to find Andrew Coffey (@coffeygrinds) getting ready to film Danny doing the daily Mr.Topstep futures video report.

Taken while @coffeygrinds filming @mrtopstep video today $es_f http://ow.ly/i/1FFn

Behind the camera: @coffeygrinds filming @mrtopstep video http://ow.ly/i/1FFH http://ow.ly/i/1FFN

I’m getting ready for our flight back to L.A.  I’ll continue the most exciting part of this day (2nd half of the trading day & the close!) in the next post.  Here’s a little preview:
We left the CME/CBOT floor a bit to have lunch with Andrew and tour the CBOE floor with Russell Rhoads of the CBOE Options Institute.  Andrew also films the Volatility Sonar Report daily, so he took us over to the VIX pit and met Jamie Tyrell, the star of the daily Volatility Sonar Report. Then we headed back to the CME floor for the final hour of trading.  The madness going on in the pits and on the data boards there with the markets dropping like a rock was insane!