Billions lost, Millions made

Today is one for the record books, In fact I have witnessed several free fall markets but not like this.

All houses were buyers off the open, locals were stuck and puked some but held their core short position. At the test of the OR at 10:30 ET is when the Paper selling started coming in heavy with 400 contacts on the sell side. Once we broke and held the OR there was continued weakness in all the markets. The breath printed the lowest reading I have seen in a very long time which was indicative of the day. Paper sold steady through out the day with only 2 meaningful buyers, Goldman, buying 250 cars at 51.00 and Swiss buying 200 at 44.50 at 1:25 ET. With short locals and a weakening broad market there was only one way to go and heavy paper selling came in as traders realized we were in for a sharp drop.

But NOBODY expected the drop we got.

There was an offer at 1128 for 200 cars. The locals didn’t want them. We were selling off all day and they saw more downside a head so they didn’t want to get long. Once we traded below 1120 the “Fast Market” started.

A fast market is when trading happens so fast the brokers are not obligated to give the best bid as fills on sell orders to their clients. That’s because the market moves so fast there could be at 1120 bid on one side of the pit and a 1118 bid on the other side at the same time. If a customer is filled at 1118 instead of 1120 he cant claim it was a bad fill.

However, as I had mentioned in an earlier post there are few occasions that there are NO bids, I mean none. Not one. As I said there where only two paper buyers and the locals wanted nothing to do with getting long in front of the freight train that was bearing down the tracks. No Paper buying and no locals buying mean no bids

Well at around 1120 something happened. Rumors say it was a fat finger bad tick of P&G or a large sell order in the e mini that was fat fingered to a huge sell order. What ever the reason, Paper sellers came in so fast, so aggressive that I thought there was a major terrorist attack or Israel nuked Iran.

I have never ever seen no bids for 60 handles!! Followed by no offers for 60 handles!! The locals just put their arms down. Remember these guys have lived through 1987, 9/11 Lehman, surprise Fed rate hikes.

One filling broker said he had a sell order for 18 cars at 1100, a sell stop no less. It was filled at 1060. There were no paper buyers to sell to and the locals simply didn’t want them until 1060. That was the first bit of paper that the locals started buying. Can you imagine the trader who had a protective stop (which was likely placed because of a loss of the trade already) and he doesn’t get filled after $180,000 further loss!!! That was just that one order and there were thousands of contracts. Not to mention all the other stops on all the other futures, stocks and options that didn’t get filled until it was too late. A lot of traders blew their accounts out today. A LOT! It will be a different market tomorrow with a lot less players due to liquidated accounts.

The locals started buying the paper offers at 60. After they bought all the paper offers there were no more offers in the pit. All traders around the world were trying to figure out what had just happened. Once traders saw the futures starting to rise buyers stepped in on the screen but there were no Paper buyers in the pit until we retraced 60 handles. We don’t see 120 handle moves in a month and we saw it in 10 minutes. An amazing day.

I have no clue what tomorrow will bring but I know a lot of traders who were trying to pick the bottom all day long wont be around anymore.

My rule to be short below the OR, long above served me well today. I think I will take tomorrow off……….. probably not.


Tim Mack