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A Guide to Floor-Trader Pivots
Oxford Reference. Publications Pages Publications Pages. Recently viewed 0 Save Search. A Dictionary of Finance and Banking 6 ed. Elite Member. Yes - would love to hear any and all details you care to share Interesting stuff. Fat Tails is exactly correct. On the trading floor His comments on the noise level as a audible cue is especially interesting as you don't hear things like that very often from guys that are not experienced on the floor.
From a "floor" perspective what most of us do here is short term position trading. The "edge" on the floor true trading came from two basic areas. Order flow AND your relationship with the floor broker was primary. Second was how you priced your markets. Guys did use visual and auditory clues.
I imagine HFT and increase in technology have changed that a bit now. Flow and relationship are pretty much self explanatory. My floor was CBOE. So say you bot puts and stock on your bid , you could offer calls down an eighth. So the pricing method was the real edge given there was still a tangible spread. Conversion, reversal, box, roll was how the pricing model would go. In the above example if paper came in to sell puts, you would price based on where you could buy stock and sell calls the conversion relative to strike price, interest and execution costs.
This describes risk arbitrage and generally does not require any indicator to be really good at it. Of course guys had huge positions on and sometimes would tend to "lean based on that and their bias. But most of the time the entire crowd was in pretty much the same position. I should say that conversion, reversal, box, roll, was how I priced. Some guys where spreaders, some guys just sold premium , etc. Could give examples on these if anyone cares. Vendor: www. A gateway drug to reality.
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Fortitudo et Honor. I've always wanted to learn options, but have my hands full in technical trading. I'm trying to understand the different strategies and as I understand it, there are dozens , but I imagine it's similar to sports betting where you try to find a disparity between 2 different bookies and create a risk-free or nearly risk free transaction. If you can bet Washington If Washington wins by 6 or more same thing. But if Washington wins by 4 or 5, you win both bets, so essentially, you're risking like odds.
Open outcry
Professional bettors try to identify lines they know that start out extreme and they know will move. They jump in at the extreme and then hedge the other way when it moves. I know it's off topic, but the concept is similar A smart man learns from his own failure and success.
But a wise man learns from the failure and success of others. The following user says Thank You to wldman for this post: ab Big Mike. Also planning on having Danny Riley from MrTopStep on soon -- who also is trading from the floor, and he can answer questions as well. We have several floor guys amongst us already as well, thx wldman.
We're here to help -- just ask For the best trading education , watch our webinars Searching for trading reviews? Please spread the word about your experience with our community! Jedi Master. I am not trading options, and as a retail trader I would not try to compete in market making strategies, where low commissions.
I am really just curious to know, how the floor trader - now a dying species - made money before computers mostly took over. Maybe we will get some entertainining stories here. For me it was not a scalp as much as it was an arbitrage. The "usual" scalp for me was based on the option greek " gamma ", but that was mostly done to recover decay to the value of the option over time So when the stock was moving you could make your theta and also scalp some profit due to a high gamma position.
Most of the time, for me anyway, I was looking for an arb opportunity that would be certainly delta neutral and hopefully keep all the greeks relatively neutral. With respect to the arb types posted by Fat Tails For me that metric was reversal, conversion, box, roll. So if a floor broker came in and said, "how are the AIG front month 55 puts" some guys would look at the screen and say back the market displayed there.
Another way to do it was to price based on the arb. If I am buyng puts, how is the stock priced and where are the calls.
Advanced system #13 (The Floor Trader System)
So if the order is selling puts my first price is the conversion. I'm buying puts and stock and selling calls OR maybe I'm already long the calls better Opposite if the broker is buying puts To improve your experience on our site, please update your browser or system. For institutions.
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