TRADING FLOOR SECRETS: Why They Call Them Analysts
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April 26, 2007
One of the greatest benefits of membership on a Chicago exchange is the extraordinary class of individuals with whom one has the opportunity to associate. Whether looking to discuss fine literature, ogle priceless art at the museums, or been raptured by the symphony and consumed by the Lyric Opera, NONE of these individuals will be seen participating with you.
Now if hot dog eating contests, playing bumper cars with your brand new boat on Lake Michigan or splitting a keg of Blatz beer without the use of a cup is your forte, then you have arrived at the right place to bond. Comparable to being back at your fraternity, the only exception is these guys have money and therefore can cause more damage/fun (see the word fun in the hedonist''s dictionary), the trading floor is not suited for the faint at heart or people offended by grown men vomiting. That is not to say this place I called home for over a decade isn''t without its warm, cozy feeling. Whenever craving a viewing of the movie Porky''s and my DVD player is on the fritz, I do miss the trading floor.
Where else can you see such things as the Minister of Finance for Japan walk around with a paper trail dragging behind him? And nothing beats seeing George Bush, Sr. walking through the S&P 500 pit only to merge with a Kick Me! sign affixed to his jacket and a secret service agent following behind with toilet paper taped to his shoe! There is always a chuckle when the radio control truck drives from pit to pit carrying its payload of Vodka and Vermouth for those individuals needing an emergency Martini.
That is not to say it is always cerebral humor such as these splitting one''s sides like an episode of the legendary Stooges. When times are dul, men do have a tendency to regress to an earlier time in their developmental stages, and what is more fun than betting on stupid human tricks? The ole $100 bill on a fish line being pulled away as an unsuspecting clerk reaching for his booty has it pulled from his grasp? Then there is the crowd favorite of betting a new clerk that he can''t drink a gallon of milk in an hour and hold it down for an hour afterwards. Free money, you say? But after seeing a grown man crying and vomiting out of nausea, embarrassment and experiencing a month''s wages of financial loss, even a member of the preliterate such as myself yearns for something more fresh and original.
My Story
I would like to see my nugget of wisdom and 5 minutes of fame go down in history as the next classic, but it was forgotten within a week. I found something new to amuse and educate at the same time. Thats mealways trying to help!
After mentioning to a new trader with more cash than brains and experience that toilets south of the equator flush in the opposite direction, a bet naturally ensued. The new trader, who I will call Alex for the sake of this article, insisted I was pulling his leg. Obviously I could not let an opportunity such as this pass without the benefit of instruction and amusement, and what started as a simple factoid turned into a whole day of fun.
Of course, when you sense you have the fish nibbling on the hook you have to set it with a big tug, so I was obligated to spin a tale of why most of the traders on the floor do the opposite of what comes natural to instinct. In Florida, a driver seeing a yellow light 900 miles away will slow down (if they even see the signal through glasses 3'''' thick and above the dash board); whereas in Chicago we look at the same signal as an indication to switch on to warp speed and blow through the red light, narrowly missing a fatal car accident and having the enjoyment of watching your passengers urinate on themselves. In other words, fun comes from doing the opposite of conventional wisdom.
Having been a science major in schools and having attended at least three classes sober, I knew enough science to really twist this guy''s head with (pseudo) scientific reasoning about why doing the opposite of human nature is the key to doing the right thing.
I started with how the male seahorse carries the babies, not the female. I brought up that water in the toilets swirl counterclockwise south of the equator and clockwise north of the equator because of the earth''s rotation, and the fact that a certain currently out-of-favor, over-weight person was the cause of the 1-degree wobble in the earth''s perfect rotation. I somehow brought Fibonacci''s study of rabbit gestation cycles in the shape of the universe, and I still don''t know why that was relevant. I mentioned that since the disappearance of the Amazon tribes, men have screwed things up to where we are always at war. But it was not until my clerk ran up to the library and got proof that toilets flushed backwards here (or down south, depending on your perspective) that my friend Alex started to think of me as credible.
Thank goodness Alex was a fan of the movie Caddyshack. I reminded him of Rodney Dangerfield talking on his golf bag phone to his stockbroker saying, They are all buying? Then sell... oh, they are selling? Then buy. I guess between his room temperature IQ and his strong desire for a Rolls Royce Convertible, not to mention that he may not have realized Caddyshack was not a documentary, Alex was not only on my hook, but was attempting to jump into the boat for me.
I had him take a blood oath where he promised to take the exact opposite side of every market maker trade he could find for the day. He further promised to fade and take the opposite side of every trend he saw, knowing that when the plug was pulled the profits would ensue. By the end of the day my newest, bestest buddy had lost about $3,000 by trading floor standards this was not much, but an invaluable lesson was learned.
LESSON
Everyone has an opinion, and on Wall Street there is an inverse relationship between what you paid for the tip and what it was worth. There are so many clever writers, brokers and announcers hawking their latest hot stock that anyone can be deluged with all this free money to be made. The term analyst is derived from the Latin roots anal which is self explanatory, and yst meaning to talk out of. (Note: This actually might be Pig Latin, but is not important for purposes of this conversation.)
Yes, since July or August of 2006 I have stated (when the stock was at $60) that it was going above $100 within a year and maybe even double, but what do I know? I was wrong as it is currently $101 in after hours markets, so I am off by about $1. That is only close enough for government work. But if you made a financial decision based on my predictions and lost money, who suffers?
When I first began my trading career I listened to some of the old-timers who had tens of millions of dollars tell me their opinion, only to find out I was dumb for listening to them. It cost me $5,000 here, $10,000 there, etc. So being the caring, giving, and benevolent individual that my readers have come to know, I taught this neophyte an invaluable lesson for a fraction of what it cost me and in a manner he will never forget, that being, it is education that counts ... not hot tips. Whatever your cost of education was (to date), I would be willing to bet mine was more expensive than yours because I didn''t have the benefit of an Optionetics or Scott Kramer in my life.
In Short
Keep learning and avoid the endless amounts of people giving free advice. You will usually hear such advice from the same individuals who have the position on and are selling you on the philosophy to ease their own nerves about their losing positions.
Looking forward to seeing you all at OASIS!
Scott Curly Kramer
Staff Writer and Trading Strategist
Optionetics.com ~ Your Options Education Site
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