Fleursdumal
फूल की बुराई
rapporto usda in uscita
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1194
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1194
COMMODITIES ... solo per pochi pazzi !!! (1 Viewer)
- Creatore Discussione ditropan
- Data di Inizio
ditropan
Forumer storico
Gianluca ha scritto:
... Gian, premesso che certezze non ce ne sono mai ... ma se tu vai a guardare i grafici dal 1990 ad oggi ti posso garantire che in modo piuttosto ricorrente i prezzi sul gas partono al rialzo e salgono tra metà giugno e fine settembre (quindi contratti tra NgNx e NgVx) ... poi nei mesi di ottobre-novembre stanno più che altro in laterale (contratti NgXx ed NgZx)... per poi scendere fino a primavera (contratti da NgZx, NgFx+1, NgGx+1 ... e via di seguito).
Detto questo magari quest'anno il contratto con scadenza novembre si fà un rialzo portentoso ... ma dal punto di vista probabilistico il comportamento di questo contratto e più di tipo laterale (o laterale ribassista, quando però partiamo da valori più alti di adesso) ... quindi sia dal punto di vista delle probabilità, e tra un mese-mese e mezzo pure la stagionalità, giocano a sfavore di ulteriori rialzi.
Considerando inoltre la psicosi che si è venuta a creare poi nella testa degli speculatori sulla abbondanza delle scorte, a meno di eventi esogeni, è più probabile vedere i prezzi su scadenze dicembre-gennaio erodersi lentamente che vedere spiccare corposi rialzi ... per questi motivi continuare ad insistere con i long rollando in continuazione e pagando dei carry spropositati non ha senso ora come ora sul gas !
Se proprio si vole cercare il recupero nell'immediato, è molto meglio puntare su di un petrolio o su di una benzina (il cui prezzo è addirittura negativo rispetto ad inizio d'anno) piuttosto che incaponirsi sul gas.
Se quelle teste da invasati di hedge e grossi fondi hanno deciso che questo non è l'anno del gas la cosa più sensata da fare è aspettare gli inizi di dicembre un possibile recupero delle quotazioni sul contratto febbraio-marzo 2007 ... magari tirato sù ad arte da previsioni su di un possibile inverno rigido e quindi shortare tale contratto fino a gennaio-febbraio ... allora li sì che vedi i prezzi andare da 10$ a 6$ nel giro di poco tempo. :yes: :yes:
ditropan
Forumer storico
NATURAL GAS, un poca di casistica e qualche commento :
Il comportamento del gas naturale statisticamente prevede un movimento a salire partendo da agosto-settembre fino a metà ottobre, la motivazione risiede nel fatto che, passata oramai l'estate, ci si concentra sugli approvigionamenti per l'inverno e si è in piena stagione di uragani; questo pone nella condizione che il comportamento dei contratti sul natural gas NGU__, NGV__ per solito sia a salire ... purtroppo non ogni anno fila liscia, anche se ...
Dal 1990 ad oggi (2006) si sono avute solo 3 occasioni in cui il contratto scadenza ottobre sia soltanto sceso ovvero il 1993, 1994 e 2001.
Inoltre, solo in 2 occasioni il contratto è solo sceso senza rimbalzo, ovvero il 1994 ed il 2001, bisogna però tenere anche conto del fatto che il 2001 fù un anno particolare in ci fù il crollo delle torri gemelle e si generò la psicosi che il consumo di carburante sarebbe drasticamente sceso per via del blocco degli aerei e della psicosi di altri attentati ... in quel periodo soffrì un po tutto insomma.
Quindi escludendo il 2001 dal 1990 ad oggi sul contratto ottobre si scese fino a scadenza senza rimbalzo solo nel 1994 ... e quest'anno idem, un bel primato ... non c'è che dire !!!
tornando a noi e alla casistica, dai grafici sotto riportati notiamo che ... a parte gli anni fortemente direzionali come il 1995, 1996, 2000 ...
(non credo che quest'anno rientri in questa categoria, visto l'andazzo delle scorte, l'assenza di uragani e per come si sono comportate le quotazioni fin'ora)
.... in tutti gli atri casi il comportamento delle quotazioni passata la metà di ottobre successivamente tende sempre a scendere fino al nuovo anno.
Ciò accade in quanto tutto il controvalore assegnato alle quotazioni sotto forma di premium-risk tende via via a scremarsi con l'avvicinarsi della primavera; in pratica le scadenze (consegne) del nuovo anno perdono di valore mano a mano che svaniscono i timori su un'inverno freddo e sulla carenza delle scorte.
... naluralmente un simile comportamento non è detto sia la regola, esistono anche anni anomali come il 2002 e 2003 ... altrimenti sarebbe troppo facile !!!
Il comportamento del gas naturale statisticamente prevede un movimento a salire partendo da agosto-settembre fino a metà ottobre, la motivazione risiede nel fatto che, passata oramai l'estate, ci si concentra sugli approvigionamenti per l'inverno e si è in piena stagione di uragani; questo pone nella condizione che il comportamento dei contratti sul natural gas NGU__, NGV__ per solito sia a salire ... purtroppo non ogni anno fila liscia, anche se ...
Dal 1990 ad oggi (2006) si sono avute solo 3 occasioni in cui il contratto scadenza ottobre sia soltanto sceso ovvero il 1993, 1994 e 2001.
Inoltre, solo in 2 occasioni il contratto è solo sceso senza rimbalzo, ovvero il 1994 ed il 2001, bisogna però tenere anche conto del fatto che il 2001 fù un anno particolare in ci fù il crollo delle torri gemelle e si generò la psicosi che il consumo di carburante sarebbe drasticamente sceso per via del blocco degli aerei e della psicosi di altri attentati ... in quel periodo soffrì un po tutto insomma.
Quindi escludendo il 2001 dal 1990 ad oggi sul contratto ottobre si scese fino a scadenza senza rimbalzo solo nel 1994 ... e quest'anno idem, un bel primato ... non c'è che dire !!!
Ditropan ha scritto:Sebbene manchino ancora tre sedute alla scadenza del contratto ottobre mi sa tanto che quest'anno si dovrà aggiungere alla casistica dell'anno nero stile 1994 ...
... il pretesto sono le scorte abbondanti (che però sono andato a vedere e sono abbastanza in linea con quelle degli altri anni), la realtà e che quest'anno quel trader americano 32-enne del fondo Amaranth si è messo a 90° con lo spread marzo aprile 2007 e come tutti i grossi speculatori sono venuti a sapere che questi era in difficoltà, a turno se lo sono spolverato per benino nel di dietro !
Vista questa particolare situazione io credo quindi che difficilmente il contratto ottobre rimbalzerà prima della sua scadenza.
tornando a noi e alla casistica, dai grafici sotto riportati notiamo che ... a parte gli anni fortemente direzionali come il 1995, 1996, 2000 ...
(non credo che quest'anno rientri in questa categoria, visto l'andazzo delle scorte, l'assenza di uragani e per come si sono comportate le quotazioni fin'ora)
.... in tutti gli atri casi il comportamento delle quotazioni passata la metà di ottobre successivamente tende sempre a scendere fino al nuovo anno.
Ciò accade in quanto tutto il controvalore assegnato alle quotazioni sotto forma di premium-risk tende via via a scremarsi con l'avvicinarsi della primavera; in pratica le scadenze (consegne) del nuovo anno perdono di valore mano a mano che svaniscono i timori su un'inverno freddo e sulla carenza delle scorte.
... naluralmente un simile comportamento non è detto sia la regola, esistono anche anni anomali come il 2002 e 2003 ... altrimenti sarebbe troppo facile !!!
Ditropan ha scritto:Nel 2003 ci fù lo spike di una settimana sul contratto gennaio 2004 (gli altri a seguire) a causa di un'interruzione delle forniture, nel 2002 non saprei.
gipa69
collegio dei patafisici
ditropan
Forumer storico
Anno particolare questo a quanto pare, bene bene la cosa inizia a farsi interessante sembra di rivivere gli anni 2000-2001 con volatilità alle stelle nell'ultima parte di stagione, pure il corn vederlo salire così in fase di raccolto è cosa assai rara ! Sembra quasi che gli stessi attori che si son messi a giocare prima su petrolio, poi sui metalli adesso si cimentino con i grains ... Dario avevi visto giusto. :yes: :yes: :yes: OK!
Unica raccomandazione è per ora lavorare di spread stando molto attenti nel prendere posizioni nette su wheat, corn, soybean e soymeal (l'avena è un caso a sè), per solito queste mp dovrebbero mantenere una vola limitata e tendenza a scendere in questa fase di stagione, ma si vede lontano un miglio che questi mercati al momento sono sotto il mirino di qualcuno, potrebbero di conseguenza (anzi lo stanno già facendo) non comportarsi secondo le regole classiche ... è quindi bene andarci cauti.
Questo pomeriggio cercherò di esserci, e se me ne danno la possibilità qualcosa lo aggiungo allo spread. :yes:
... buone granaglie a tutti !!!
Unica raccomandazione è per ora lavorare di spread stando molto attenti nel prendere posizioni nette su wheat, corn, soybean e soymeal (l'avena è un caso a sè), per solito queste mp dovrebbero mantenere una vola limitata e tendenza a scendere in questa fase di stagione, ma si vede lontano un miglio che questi mercati al momento sono sotto il mirino di qualcuno, potrebbero di conseguenza (anzi lo stanno già facendo) non comportarsi secondo le regole classiche ... è quindi bene andarci cauti.
Questo pomeriggio cercherò di esserci, e se me ne danno la possibilità qualcosa lo aggiungo allo spread. :yes:
... buone granaglie a tutti !!!
ditropan
Forumer storico
asqualealias ha scritto:
non lo noti perchè quello che tu vedi sul grafico di futuresource è con time frame mensile, lo spread comunque in quell'anno andò fino a -290 cent.
successe attorno la metà di maggio di quell'anno ... in pratica il wheat saliva a bestia su tutte le scadenze (quindi con poco gap tra scadenza e scadenza) il corn invece seguiva a ruota solo sull'ultima scadenza che batteva attorno ai 500, con le altre scadenze ferme ... se non sbaglio il dicembre sul corn quotava sui 360 (fortissimo gap tra scadenza e scadenza) ... con il risultato che se uno si faceva uno spread sui contratti dicembre si prendeva una silurata enorme !!!
Quello però che più sorprende ora non è tanto una apertura così elevata dello spread w-c quando il periodo in cui questa accade, divergenze così ampie si sono sempre avute tra aprile e luglio, in piena stagionalità sulle granaglie, non certo adesso con un wheat oramai già raccolto a luglio (la produzione australiana di adesso conta meno di niente sul totale) e corn in piena fase di raccolto.
Sembra più un trend voluto e cercato da qualche pezzo grosso che un naturale evolversi dei prezzi di mercato ... si insomma ... adesso in piena notte e a stagione oramai finita vedere un wheat che si fà un'altro limit-up raggiungendo quota 524 e un comportamento più da piena stagionalità, cui adesso come adesso non riesco a dare un senso.
IMHO.
ditropan
Forumer storico
Situazione spread Soyben meal vs Wheat :
Ricordo che lo spread era bilanciato con ogni lotto composto da :
3 contratti long su Soymeal
2 contratti short su Wheat
Io poi avevo introdotto una variante in cui, invece di fare spread sulla stessa scadenza usavo il soymeal scadenza luglio 2007 ed il wheat scadenza dicembre 2006; la motivazione era che mi attendevo un calo dei prezzi sul wheat da quì a novembre ed una ripartenza successiva della soia e suoi derivati a partire del nuovo anno e nova stagionalità sui grains.
Il contratto di soymeal sarebbe quindi rimasto in carico per il nuovo anno, in quanto prevedevo di chiudere solo il wheat.
Le cose purtroppo sono andate in senso completamente opposto, il wheat si è fatto un rally bello potente e la farina di soia praticamente non ha coperto un granchè ... la situazione è dunque questa ...
... spread tiratissimo e marginazione a go go !
... siccome io non demordo e su questo spread nutro buone aspettative vediamo di considerare già fino ad ora la possibilità di rollaggi e di fare alcuni ragionamenti :
In questi ultimi 2 giorni il wheat è passato in backwardation dal contango di settimana scorsa, in pratica il dicembre è salito molto più delle altre scadenze, un eventuale rollaggio su luglio 2007 comportere quindi una perdita di punti rispetto a settimana scorsa, così pure un rollaggio su marzo 2007.
La perdita però risulterebbe minore rollando su marzo (WH7) che su luglio (WN7).
Se consideriamo che con il contratto scadenza marzo 2007 arriviamo (a livello di contrattazione) fino a fine febbraio (FND), e che solitamente nel mese di gennaio-febbraio le quotazioni sui grains tendono a cedere per via del february-break; inoltre quest'anno partiamo da livelli di quotazione abbastanza elevati per essere ad ottobre, le possibilità che questa debolezza si verifichi dovrebbero essere buone.
Altro punto a favore poi è che in questo momento il premium-risk associato al wheat per via della speculazione sul raccolto australiano è divenuto molto elevato, abbiamo già scontato un macello di cattive notizie ... ed il grano invernale deve ancora essere seminato !
Tutto questo mi fà ancora ben sperare su un'esito positivo dello spread da adesso a febbraio, non dovessimo rientrare per fine novembre se le cose si mantengono così si potrà semplicemente rollare solo i contratti sul wheat da dicembre a scadenza marzo 2007, migliorando pure un pò la posizione visto che sul wheat di marzo c'è ancora contango ...
Ricordo che lo spread era bilanciato con ogni lotto composto da :
3 contratti long su Soymeal
2 contratti short su Wheat
Io poi avevo introdotto una variante in cui, invece di fare spread sulla stessa scadenza usavo il soymeal scadenza luglio 2007 ed il wheat scadenza dicembre 2006; la motivazione era che mi attendevo un calo dei prezzi sul wheat da quì a novembre ed una ripartenza successiva della soia e suoi derivati a partire del nuovo anno e nova stagionalità sui grains.
Il contratto di soymeal sarebbe quindi rimasto in carico per il nuovo anno, in quanto prevedevo di chiudere solo il wheat.
Le cose purtroppo sono andate in senso completamente opposto, il wheat si è fatto un rally bello potente e la farina di soia praticamente non ha coperto un granchè ... la situazione è dunque questa ...
... spread tiratissimo e marginazione a go go !
... siccome io non demordo e su questo spread nutro buone aspettative vediamo di considerare già fino ad ora la possibilità di rollaggi e di fare alcuni ragionamenti :
In questi ultimi 2 giorni il wheat è passato in backwardation dal contango di settimana scorsa, in pratica il dicembre è salito molto più delle altre scadenze, un eventuale rollaggio su luglio 2007 comportere quindi una perdita di punti rispetto a settimana scorsa, così pure un rollaggio su marzo 2007.
La perdita però risulterebbe minore rollando su marzo (WH7) che su luglio (WN7).
Se consideriamo che con il contratto scadenza marzo 2007 arriviamo (a livello di contrattazione) fino a fine febbraio (FND), e che solitamente nel mese di gennaio-febbraio le quotazioni sui grains tendono a cedere per via del february-break; inoltre quest'anno partiamo da livelli di quotazione abbastanza elevati per essere ad ottobre, le possibilità che questa debolezza si verifichi dovrebbero essere buone.
Altro punto a favore poi è che in questo momento il premium-risk associato al wheat per via della speculazione sul raccolto australiano è divenuto molto elevato, abbiamo già scontato un macello di cattive notizie ... ed il grano invernale deve ancora essere seminato !
Tutto questo mi fà ancora ben sperare su un'esito positivo dello spread da adesso a febbraio, non dovessimo rientrare per fine novembre se le cose si mantengono così si potrà semplicemente rollare solo i contratti sul wheat da dicembre a scadenza marzo 2007, migliorando pure un pò la posizione visto che sul wheat di marzo c'è ancora contango ...
Fleursdumal
फूल की बुराई
Next Amaranth Roils Commodity Brokers as Prices Drop (Update1)
By Edward Robinson
Oct. 10 (Bloomberg) -- At 7:55 a.m., five minutes before the opening bell, Anthony Compagnino and Michael Ragazzo huddle in their office on the New York Board of Trade floor -- a booth with a dozen telephones and no chairs -- to plot their next move in the cocoa pit.
``I should have picked a less stressful job, like bomb defusing,'' says Ragazzo, a commodities broker at East Coast Options Services.
After five years, the rally in commodity prices has hit a wall. For two days, Ragazzo and Compagnino, his boss, have been selling cocoa futures as prices have plummeted 15 percent. Hedge funds that have been riding the richest commodities boom in a generation have dumped cocoa en masse, upending the market.
Now, on July 19, the guys at East Cost Options agree that the worst is over. Compagnino, 46, wearing a blue and gold trader's jacket, hustles to the top rung of the cocoa pit, the tiered ring where trading takes place. Ragazzo, 48, in a matching coat, takes up a position nearby, a phone to each ear.
The bell sounds -- and all hell breaks loose. One floor broker barks a bid to buy cocoa for September delivery for $1,517 a metric ton. Another hollers an offer to sell at $1,507. The traders down in the pit can't settle on a price. Compagnino starts selling.
``Thirty Seps at 18! Thirty Seps at 18!'' Compagnino thunders, offering to sell 30 September contracts on cocoa for $1,518 per ton.
Commodities Stumble
The fate of a single futures contract is just one worry for New York Board of Trade brokers and their counterparts around the world. The Reuters/Jefferies CRB Price Index, which tracks a basket of 19 commodities, sank to 295.13 on Oct. 3, its lowest level since May 16, 2005. Since May, the index had lost almost 12 percent as crude oil fell and gold slid below $600 an ounce. Today, crude oil fell below $59 a barrel in New York after Saudi Arabia's state oil company told customers in East Asia and Europe to expect the same quantity of oil in November as this month, undercutting OPEC's plans to cut output. After doubling to a 24- year high of 19.3 cents a pound on Feb. 3, sugar has plunged 40 percent.
For traders like Compagnino, that was no small milestone. The decline marks the market's first reversal since 2001, when China's voracious appetite for raw materials and trades by the $1.2 trillion hedge fund industry combined to send prices soaring.
The question now is whether the drop is nothing more than a hiccup in a bull market that still has years to run -- or the start of a commodities bust.
Bears like Stephen Roach, New York-based chief global economist at Morgan Stanley, say the bust is already under way. ``The megarun for commodities has run its course,'' Roach, 61, says.
Bulls Run
China's demand for industrial commodities, which has driven prices higher for years, is going to slacken, he says. The People's Bank of China has raised interest rates twice this year to cool an economy that grew 11.3 percent during the second quarter.
Bulls like Jim Rogers, who co-founded the famous Quantum Fund with George Soros, say commodities have plenty of steam left. The previous bull market ran for 14 years, from 1968 to '82, and this one will last at least that long, Rogers, 63, says.
Rogers, chairman of Beeland Interests Inc., a New York-based investment firm, says the recent slump is a short-term correction. ``The idea that this is a bubble is laughable,'' Rogers says.
Over the long haul, China and India will devour raw materials as they emerge as economic powers. Supply won't be able to keep up with demand, he says. Just look at oil. As recently as 1992, China was self-sufficient in oil. Today, it's importing 40 percent of its needs.
In the Pit
Caught in the middle of all this are pit traders like Compagnino. They make money either by buying and selling on behalf of trading desks, money managers and companies that produce or use commodities or by wagering their own money in the markets. Futures -- agreements to buy or sell specific securities or commodities at a specific price on a certain date -- are part of the $8.7 billion-a-day market in exchange-traded commodity derivatives, a family of instruments that also includes options.
The boom has been good to the folks on the floor. Exchanges like the New York Board of Trade are among the last places on Wall Street where a guy like Compagnino -- who grew up on the Brooklyn waterfront and quit college after a year -- can still strike it rich.
A typical broker on the NYBOT, the world's largest marketplace for commodities such as sugar, cotton, coffee and cocoa, earns about $200,000 a year. A hotshot on the New York Mercantile Exchange, the world's largest energy exchange, can pull down $10 million.
Staten Island
``Never in my wildest dreams did I think I would make the money I made in the last couple of years,'' Compagnino says. He's used his winnings to buy a 5,300-square-foot (490-square-meter) house with a pool in the New York borough of Staten Island.
The New York Board of Trade has become a hot commodity itself. In September, IntercontinentalExchange Inc., an Atlanta- based electronic marketplace, agreed to buy the bourse for about $1 billion in cash and stock.
On the Nymex floor, Eric Bolling, an independent trader, or local, says he's made a killing, too.
Bolling, a square-jawed man who once played third base for a minor-league baseball team affiliated with the Pittsburgh Pirates, says he's scored this year by betting that the prices of natural gas and crude oil would converge. He did so well that in August he jetted off for a vacation in the Bahamas.
``I can't go anywhere that doesn't have a casino,'' Bolling, 43, says.
`Reading the Ring'
Over at New York-based Comex, the world's largest gold and silver marketplace, Kevin Grady says he's thrived as a ``scalper'' in the gold pit.
Grady trades for London-based Man Financial, a unit of Man Group Plc, the world's largest publicly traded hedge fund manager. He tries to make money by watching what his rivals are doing -- ``reading the ring,'' he calls it -- and then dodging in and out of the market.
``Markets change constantly, and gold traders have to sense that,'' Grady, 42, says. Like Compagnino, Grady grew up in Brooklyn and came to the pits after dropping out of college.
The commodities pits can be lucrative -- and dangerous. Traders like Bolling, Compagnino and Grady must avoid getting steamrollered by the hedge funds and Wall Street investment banks that rush in and out of the markets.
Since 1999, the amount of money invested in commodities by pension funds, mutual funds and endowments has soared almost 17- fold, to $100 billion from $6 billion, according to Barclays Capital, the securities unit of London-based Barclays Plc.
Hot Money
Hedge funds, commercial banks and Wall Street firms, meantime, have poured about $50 billion into the market, according to John Normand, London-based global currency, commodity and fixed-income strategist at JPMorgan Chase & Co.
Hedge funds have pumped up prices and trading in copper, natural gas and even cocoa, traders say. Richard Bernstein, chief investment strategist at Merrill Lynch & Co., found in June and July that many commodity prices were 20-50 percent higher than they should have been because so much hot money had flooded in.
``We used to think 200 contracts was a big trade, but hedge funds put on trades with 2,000 contracts,'' says Michael Overlander, a 30-year veteran of the pits and co-founder of Sucden (UK) Ltd., a London-based commodities brokerage. ``They come in bullish and keep the market up, but when they turn, you can see some pretty severe reactions.''
Some hedge funds have stumbled hard lately. Hedge fund manager Amaranth Group Inc. lost about $6.5 billion in September on wrong-way bets in the natural gas market and is firing 60 percent of its workforce as it winds down.
MotherRock Closes
``We are in discussions with our prime broker and other counterparties and are working to protect our investors while meeting the obligations of our creditors,'' Nick Maounis, founder of the Greenwich, Connecticut-based firm, said in a letter to investors that was obtained by Bloomberg News.
MotherRock LP, a New York-based hedge fund firm run by Robert ``Bo'' Collins, the president of Nymex from 2001 to 2004, lost about $190 million on natural gas in June and July. On Aug. 3, Collins, a former senior natural gas trader at El Paso Corp., sent a letter to clients saying MotherRock would shut down.
``Let me say upfront that I regret MotherRock's terrible performance and its impact on your investments,'' Collins said in his letter, a copy of which was obtained by Bloomberg News.
Maounis, 43, and Collins, 40, declined to comment for this story.
Blowups Ahead
Amaranth and MotherRock probably aren't the only hedge fund firms that have stumbled in the market. In early August, hedge funds held U.S. futures contracts on a total of 1.3 trillion cubic feet (37 billion cubic meters) of natural gas, 1.5 times the amount in storage along the Gulf of Mexico, according to the U.S. Commodity Futures Trading Commission and the U.S. Department of Energy. The number of contracts that haven't been closed, liquidated or delivered is known as open interest.
``Given the stupendous level of open interest out there, there's probably more than one MotherRock floating around,'' says Stephen Schork, an analyst who edits the Schork Report, an energy markets newsletter.
It took hedge funds years to come around to commodities. Back in the 1990s, many of these private pools of investment capital couldn't have cared less about natural gas or cocoa. The CRB index fell 18 percent from 1989 to '99, while the Standard & Poor's 500 Index quadrupled.
Floor traders got as much respect as weekend gamblers in Las Vegas. ``The stock brokering fraternity deemed commodities as very `spivvy,' very high risk,'' Overlander, 54, says. ``We were treated with disdain.''
Sugar King
Compagnino waited a long time for a run like this. He says that when he was 18, he wanted to be a doctor and enrolled at Brooklyn College. He dropped out after one year because he didn't like school and got a $150-a-week back-office job at Shearson Hayden Stone Inc., where Sanford Weill, the man who would go on to create Citigroup Inc., was chairman.
One day in 1980, Compagnino was dispatched to the World Trade Center to retrieve some trading tickets. There, he saw a gold trader make $15,000 in 15 minutes.
``I knew that's what I wanted to be doing,'' Compagnino says. He joined East Coast Options in 1993.
Since then, Compagnino has become the biggest sugar broker on the New York Board of Trade, which moved into the Nymex's building in lower Manhattan after its World Trade Center trading floor was destroyed in the Sept. 11, 2001, terrorist attacks.
Commemorative Pins
Dressed in different-colored jackets, many adorned with World Trade Center commemorative pins, the traders look like members of different clans. Most know each other. Two in five live on Staten Island. After the close of trading on Thursdays and Fridays, many unwind over beers at nearby bars such as P.J. Clarke's on the Hudson, the downtown offshoot of a venerable East Side saloon.
Compagnino doesn't socialize with other traders.
``I don't want people to know how I think,'' he says. ``These guys are my competitors, and the more they know about you, the more vulnerable you are.''
Compagnino buys and sells futures for investors, as well as for sugar growers, chocolate makers and other companies. His gravelly voice is testament to his years of hollering in the pits. In 1995, he opened his mouth to speak and no sound came out. It took him almost five years of voice therapy to restore his vocal cords to full strength.
A heavyset man who wears a diamond-encrusted cross around his neck, Compagnino studies crop reports and visits sugar growers to get a bead on the market.
Hot Cocoa
He says he bought sugar in November 2005 for delivery in May 2006, betting that demand for Brazilian sugar cane-based ethanol would rise as oil prices marched higher. He bailed out in January, pocketing a sweet 42 percent return. The swoon was part of the sweetener's worst quarter since 1981.
This past July, Compagnino took another wild ride, this time in the cocoa market. First, cocoa shot to a 15-month high of $1,734 per metric ton as hedge funds piled into the market. Then, on July 17, prices went into a free fall as the funds started to sell.
Traders rushed the cocoa pit. One of them, throwing his arms back and forth and shouting orders, slammed another in the nose and knocked him to one knee.
After the two-day rout, Compagnino and Ragazzo are meeting in East Coast Options' booth on the exchange floor. Ragazzo hands Compagnino a chart tracking the price of cocoa and its 200-day moving-average price, now $1,529.
`Stop Trading!'
After checking London prices, they agree that cocoa has probably hit bottom and is likely to rally toward that average and then trade from $1,527 to $1,537.
A client has called in a sell order, and Compagnino wants to execute the trade above the previous day's closing price.
As trading erupts, Paul Dapolito, a local in a maroon jacket standing next to Compagnino, signals he's buying.
``Seventeen bid for 1,000 Seps!'' Dapolito shouts, moving his arms as if he's raking in the pot in a poker game. He's offering to buy 1,000 September contracts at $1,517.
In response, other traders shout offers to sell at $1,505 and $1,507, signaling with their palms out. No one can agree on price.
``Stop trading! Stop trading!'' shouts Patrick Quinn, the ``head caller'' who referees trading from a perch above the pit.
Quinn points to Dapolito, asks him to repeat his bid, and then points from trader to trader, around the ring, trying to match buyers and sellers and break the logjam. At this point, Compagnino starts selling.
Preordained Move
``All of a sudden you hear that the market is lower than what you expect, so you have to change your mind-set,'' Compagnino says later. ``It was very aggressive selling out there.''
Compagnino says hedge funds were behind the tumult. The number of outstanding cocoa contracts held by hedge funds had jumped 60 percent to 62,029 contracts in the four weeks ended on July 11, according to the CFTC. That combined long position shrank by almost 20,000 contracts, or 30 percent, to 43,349 contracts on July 25.
``This whole move was preordained by the hedge funds' going long and then getting out,'' Compagnino says. He says he was selling for hedge funds himself.
Over in the Nymex natural gas pit, Bolling has had to avoid getting bulldozed by hedge funds.
Bolling has been in the thick of the oil and natural gas rings for almost two decades. A Chicago native, he got into energy trading after he tore his rotator cuff in 1985, ending his hopes for a career in professional baseball.
War and Weather
The father of his girlfriend at the time was an energy trader at now defunct Enron Corp., so Bolling decided to give that a go. After stints as a broker at Prudential Bache Inc. and Shearson Lehman Brothers Inc., he went solo as a local in 1989.
Bolling says he didn't get hooked on the job until January 1991. That month, oil surged 18 percent as the U.S. prepared to go to war with Iraq.
``It was the first time I saw anything move that violently,'' Bolling says. ``It awakened me to the fact that there was tremendous risk -- and opportunity -- in the energy markets.''
Today, Bolling trades other commodities, too, but natural gas is his favorite. Gas is as unpredictable as the weather. More than 20 percent of U.S. electricity is generated by burning the fuel, so heat waves and cold snaps wreak havoc on prices.
Bolling, like many commodity traders, uses past prices to try to predict future prices. ``I cannot manage money without looking at a historic record,'' he says.
Heat Wave
On a late June day, Bolling stares at a number on his computer screen and grins. Crude oil futures are trading at $72.19 a barrel, and natural gas futures are at $5.88 per million British thermal units. The difference -- Bolling's number, $66.31 -- is the widest he's ever seen, he says. So, betting that gas will rise and/or oil will fall, he starts buying gas futures and selling crude contracts. The spread has to narrow, he says.
At first, the trade looks dicey: The spread widens for two weeks. Then, during the week of July 17, a heat wave rolls across the U.S. and demand for power spikes. Natural gas futures climb more than 14 percent on July 31 alone.
Bolling exits his trade on Aug. 3. In all, natural gas prices have shot up 41 percent while oil has gained just 4 percent. Someone who made 10 spread trades like Bolling's would have pocketed $140,000.
During the past year or so, natural gas has been particularly volatile. Prices surged in the months after Hurricane Katrina devastated the U.S. Gulf Coast. Nymex futures rose 42 percent to $15.37 per million BTUs on Dec. 13.
`$1,000 Table'
Later, after traders realized the U.S. was going to have a mild winter, prices plunged 32 percent during the first three months of 2006.
``It's the $1,000 table in the casino,'' Bolling says of natural gas.
Gold has had a rocky run, too, and Grady, who's been trading the metal for 17 years, says he doesn't like to hold positions long.
The price of gold tends to rise in times of political turmoil. There's been plenty of that lately. In April, as North Korea prepared to test long-range missiles and Iran pressed ahead with its nuclear program, gold rose to $654.42 an ounce, up 26 percent for the year.
Then, on May 12, concern that U.S. inflation was accelerating drove the metal to $732, a 26-year high.
Grady, who stands in the same place every day on the top rung of the pit, says he'd never witnessed a run-up like that before. He sold some long positions as soon as gold hit $700.
`Too Far, Too Fast'
``The market had come too far, too fast,'' Grady says. ``It was a market-overboard condition.''
Gold eventually sank to $629.60 on June 1 before rallying again when war broke out in Lebanon. Speculators rushed back into the market. Open interest held by such short-term investors rose to 143,202 on July 18 from 128,310 on June 27, according to the CFTC.
Once again, Grady smelled a sell-off. He says he shorted gold on July 18, and the metal fell 2.6 percent, to $613.20 an ounce, over the next four days.
Like Compagnino, Grady was born in Brooklyn -- in Grady's case, in Bay Ridge, an Irish and Italian neighborhood that's stocked the ranks of the New York police and fire departments for generations.
Grady says he dropped out of St. John's University in Queens, New York, because he decided he didn't want a white- collar desk job. His mother, then a vice president at Refco Inc., the now defunct New York-based futures brokerage, got him a job in Refco's mailroom in 1984.
Three Brothers
``My friends said, `You're out of your mind,''' Grady recalls. ``But I couldn't see myself sitting behind a desk.''
Five years later, Grady became a floor trader for Refco, where his two brothers, Stephen and John, also worked. Refco filed the 15th-biggest bankruptcy in U.S. history in October 2005, a week after disclosing that former Chief Executive Officer Phillip Bennett allegedly concealed $430 million in debt. Bennett pleaded not guilty to federal fraud charges in November 2005 and is awaiting trial. Man Group acquired Refco out of bankruptcy.
So far, prices of industrial metals have held up better than prices of other commodities. Construction in China has spurred record demand for copper, nickel and zinc.
The nickel shortage is especially acute. This year, global stockpiles fell 83 percent to 6,120 metric tons as of Aug. 17, according to the London Metal Exchange. On Aug. 16, the three- month futures contract for the metal, which is used to make stainless steel, blew through the $29,000-per-metric-ton level for the first time.
Red Leather Sofa
Steelmakers have turned to the futures market to obtain immediate deliveries of nickel. You can see the intensity of demand in the trading ring at the LME.
The exchange is an oasis of civility compared with the raucous shoutfests in the New York pits. Traders face each other on a round, red-leather sofa, and must stay seated during trading or pay fines.
They also must wear jackets and neckties and are forbidden from unbuttoning their collars. Profanity is frowned upon. Copper, aluminum, lead, zinc and nickel are traded in five-minute turns.
In August, when nickel was off the charts, traders politely bought and sold futures like it was just another day at the office. Then, in the final 10 seconds of the session, the ring opened to cash bids and offers for immediate delivery.
The traders erupted, yelling buy orders, gesticulating wildly and risking penalties by leaping to their feet.
`Just Nasty'
When demand is low, a commodity's spot price tends to be less than its price for future delivery. Traders call this rising price curve ``contango.'' It reflects the costs of storage and insurance.
When demand is high -- as it has been for nickel lately -- then the opposite happens. The spot price exceeds the future price, a situation known as ``backwardation.''
In August, spot nickel was trading at a 15 percent premium to the three-month contract and a 32 percent premium to the 15- month contract.
``The cash-to-forward price in nickel is just nasty,'' says Russell Plackett, head of metals trading in the London office of Paris-based BNP Paribas SA. In two decades of metal trading, Plackett, 38, has rarely seen spreads like those, he says.
Traders thrive in volatile markets -- provided they bet right. Blowups at hedge fund firms such as Amaranth and MotherRock show what can happen when trades go wrong.
``In big moves, there's always someone who scores huge and someone who gets crushed,'' says Ed Silliere, an independent gold trader on the Nymex. Now that commodity prices have tottered, pit traders can only hope that investors who've rushed into the market won't trample them running for the exits.
To contact the reporter on this story: Edward Robinson in San Francisco [email protected] .
By Edward Robinson
Oct. 10 (Bloomberg) -- At 7:55 a.m., five minutes before the opening bell, Anthony Compagnino and Michael Ragazzo huddle in their office on the New York Board of Trade floor -- a booth with a dozen telephones and no chairs -- to plot their next move in the cocoa pit.
``I should have picked a less stressful job, like bomb defusing,'' says Ragazzo, a commodities broker at East Coast Options Services.
After five years, the rally in commodity prices has hit a wall. For two days, Ragazzo and Compagnino, his boss, have been selling cocoa futures as prices have plummeted 15 percent. Hedge funds that have been riding the richest commodities boom in a generation have dumped cocoa en masse, upending the market.
Now, on July 19, the guys at East Cost Options agree that the worst is over. Compagnino, 46, wearing a blue and gold trader's jacket, hustles to the top rung of the cocoa pit, the tiered ring where trading takes place. Ragazzo, 48, in a matching coat, takes up a position nearby, a phone to each ear.
The bell sounds -- and all hell breaks loose. One floor broker barks a bid to buy cocoa for September delivery for $1,517 a metric ton. Another hollers an offer to sell at $1,507. The traders down in the pit can't settle on a price. Compagnino starts selling.
``Thirty Seps at 18! Thirty Seps at 18!'' Compagnino thunders, offering to sell 30 September contracts on cocoa for $1,518 per ton.
Commodities Stumble
The fate of a single futures contract is just one worry for New York Board of Trade brokers and their counterparts around the world. The Reuters/Jefferies CRB Price Index, which tracks a basket of 19 commodities, sank to 295.13 on Oct. 3, its lowest level since May 16, 2005. Since May, the index had lost almost 12 percent as crude oil fell and gold slid below $600 an ounce. Today, crude oil fell below $59 a barrel in New York after Saudi Arabia's state oil company told customers in East Asia and Europe to expect the same quantity of oil in November as this month, undercutting OPEC's plans to cut output. After doubling to a 24- year high of 19.3 cents a pound on Feb. 3, sugar has plunged 40 percent.
For traders like Compagnino, that was no small milestone. The decline marks the market's first reversal since 2001, when China's voracious appetite for raw materials and trades by the $1.2 trillion hedge fund industry combined to send prices soaring.
The question now is whether the drop is nothing more than a hiccup in a bull market that still has years to run -- or the start of a commodities bust.
Bears like Stephen Roach, New York-based chief global economist at Morgan Stanley, say the bust is already under way. ``The megarun for commodities has run its course,'' Roach, 61, says.
Bulls Run
China's demand for industrial commodities, which has driven prices higher for years, is going to slacken, he says. The People's Bank of China has raised interest rates twice this year to cool an economy that grew 11.3 percent during the second quarter.
Bulls like Jim Rogers, who co-founded the famous Quantum Fund with George Soros, say commodities have plenty of steam left. The previous bull market ran for 14 years, from 1968 to '82, and this one will last at least that long, Rogers, 63, says.
Rogers, chairman of Beeland Interests Inc., a New York-based investment firm, says the recent slump is a short-term correction. ``The idea that this is a bubble is laughable,'' Rogers says.
Over the long haul, China and India will devour raw materials as they emerge as economic powers. Supply won't be able to keep up with demand, he says. Just look at oil. As recently as 1992, China was self-sufficient in oil. Today, it's importing 40 percent of its needs.
In the Pit
Caught in the middle of all this are pit traders like Compagnino. They make money either by buying and selling on behalf of trading desks, money managers and companies that produce or use commodities or by wagering their own money in the markets. Futures -- agreements to buy or sell specific securities or commodities at a specific price on a certain date -- are part of the $8.7 billion-a-day market in exchange-traded commodity derivatives, a family of instruments that also includes options.
The boom has been good to the folks on the floor. Exchanges like the New York Board of Trade are among the last places on Wall Street where a guy like Compagnino -- who grew up on the Brooklyn waterfront and quit college after a year -- can still strike it rich.
A typical broker on the NYBOT, the world's largest marketplace for commodities such as sugar, cotton, coffee and cocoa, earns about $200,000 a year. A hotshot on the New York Mercantile Exchange, the world's largest energy exchange, can pull down $10 million.
Staten Island
``Never in my wildest dreams did I think I would make the money I made in the last couple of years,'' Compagnino says. He's used his winnings to buy a 5,300-square-foot (490-square-meter) house with a pool in the New York borough of Staten Island.
The New York Board of Trade has become a hot commodity itself. In September, IntercontinentalExchange Inc., an Atlanta- based electronic marketplace, agreed to buy the bourse for about $1 billion in cash and stock.
On the Nymex floor, Eric Bolling, an independent trader, or local, says he's made a killing, too.
Bolling, a square-jawed man who once played third base for a minor-league baseball team affiliated with the Pittsburgh Pirates, says he's scored this year by betting that the prices of natural gas and crude oil would converge. He did so well that in August he jetted off for a vacation in the Bahamas.
``I can't go anywhere that doesn't have a casino,'' Bolling, 43, says.
`Reading the Ring'
Over at New York-based Comex, the world's largest gold and silver marketplace, Kevin Grady says he's thrived as a ``scalper'' in the gold pit.
Grady trades for London-based Man Financial, a unit of Man Group Plc, the world's largest publicly traded hedge fund manager. He tries to make money by watching what his rivals are doing -- ``reading the ring,'' he calls it -- and then dodging in and out of the market.
``Markets change constantly, and gold traders have to sense that,'' Grady, 42, says. Like Compagnino, Grady grew up in Brooklyn and came to the pits after dropping out of college.
The commodities pits can be lucrative -- and dangerous. Traders like Bolling, Compagnino and Grady must avoid getting steamrollered by the hedge funds and Wall Street investment banks that rush in and out of the markets.
Since 1999, the amount of money invested in commodities by pension funds, mutual funds and endowments has soared almost 17- fold, to $100 billion from $6 billion, according to Barclays Capital, the securities unit of London-based Barclays Plc.
Hot Money
Hedge funds, commercial banks and Wall Street firms, meantime, have poured about $50 billion into the market, according to John Normand, London-based global currency, commodity and fixed-income strategist at JPMorgan Chase & Co.
Hedge funds have pumped up prices and trading in copper, natural gas and even cocoa, traders say. Richard Bernstein, chief investment strategist at Merrill Lynch & Co., found in June and July that many commodity prices were 20-50 percent higher than they should have been because so much hot money had flooded in.
``We used to think 200 contracts was a big trade, but hedge funds put on trades with 2,000 contracts,'' says Michael Overlander, a 30-year veteran of the pits and co-founder of Sucden (UK) Ltd., a London-based commodities brokerage. ``They come in bullish and keep the market up, but when they turn, you can see some pretty severe reactions.''
Some hedge funds have stumbled hard lately. Hedge fund manager Amaranth Group Inc. lost about $6.5 billion in September on wrong-way bets in the natural gas market and is firing 60 percent of its workforce as it winds down.
MotherRock Closes
``We are in discussions with our prime broker and other counterparties and are working to protect our investors while meeting the obligations of our creditors,'' Nick Maounis, founder of the Greenwich, Connecticut-based firm, said in a letter to investors that was obtained by Bloomberg News.
MotherRock LP, a New York-based hedge fund firm run by Robert ``Bo'' Collins, the president of Nymex from 2001 to 2004, lost about $190 million on natural gas in June and July. On Aug. 3, Collins, a former senior natural gas trader at El Paso Corp., sent a letter to clients saying MotherRock would shut down.
``Let me say upfront that I regret MotherRock's terrible performance and its impact on your investments,'' Collins said in his letter, a copy of which was obtained by Bloomberg News.
Maounis, 43, and Collins, 40, declined to comment for this story.
Blowups Ahead
Amaranth and MotherRock probably aren't the only hedge fund firms that have stumbled in the market. In early August, hedge funds held U.S. futures contracts on a total of 1.3 trillion cubic feet (37 billion cubic meters) of natural gas, 1.5 times the amount in storage along the Gulf of Mexico, according to the U.S. Commodity Futures Trading Commission and the U.S. Department of Energy. The number of contracts that haven't been closed, liquidated or delivered is known as open interest.
``Given the stupendous level of open interest out there, there's probably more than one MotherRock floating around,'' says Stephen Schork, an analyst who edits the Schork Report, an energy markets newsletter.
It took hedge funds years to come around to commodities. Back in the 1990s, many of these private pools of investment capital couldn't have cared less about natural gas or cocoa. The CRB index fell 18 percent from 1989 to '99, while the Standard & Poor's 500 Index quadrupled.
Floor traders got as much respect as weekend gamblers in Las Vegas. ``The stock brokering fraternity deemed commodities as very `spivvy,' very high risk,'' Overlander, 54, says. ``We were treated with disdain.''
Sugar King
Compagnino waited a long time for a run like this. He says that when he was 18, he wanted to be a doctor and enrolled at Brooklyn College. He dropped out after one year because he didn't like school and got a $150-a-week back-office job at Shearson Hayden Stone Inc., where Sanford Weill, the man who would go on to create Citigroup Inc., was chairman.
One day in 1980, Compagnino was dispatched to the World Trade Center to retrieve some trading tickets. There, he saw a gold trader make $15,000 in 15 minutes.
``I knew that's what I wanted to be doing,'' Compagnino says. He joined East Coast Options in 1993.
Since then, Compagnino has become the biggest sugar broker on the New York Board of Trade, which moved into the Nymex's building in lower Manhattan after its World Trade Center trading floor was destroyed in the Sept. 11, 2001, terrorist attacks.
Commemorative Pins
Dressed in different-colored jackets, many adorned with World Trade Center commemorative pins, the traders look like members of different clans. Most know each other. Two in five live on Staten Island. After the close of trading on Thursdays and Fridays, many unwind over beers at nearby bars such as P.J. Clarke's on the Hudson, the downtown offshoot of a venerable East Side saloon.
Compagnino doesn't socialize with other traders.
``I don't want people to know how I think,'' he says. ``These guys are my competitors, and the more they know about you, the more vulnerable you are.''
Compagnino buys and sells futures for investors, as well as for sugar growers, chocolate makers and other companies. His gravelly voice is testament to his years of hollering in the pits. In 1995, he opened his mouth to speak and no sound came out. It took him almost five years of voice therapy to restore his vocal cords to full strength.
A heavyset man who wears a diamond-encrusted cross around his neck, Compagnino studies crop reports and visits sugar growers to get a bead on the market.
Hot Cocoa
He says he bought sugar in November 2005 for delivery in May 2006, betting that demand for Brazilian sugar cane-based ethanol would rise as oil prices marched higher. He bailed out in January, pocketing a sweet 42 percent return. The swoon was part of the sweetener's worst quarter since 1981.
This past July, Compagnino took another wild ride, this time in the cocoa market. First, cocoa shot to a 15-month high of $1,734 per metric ton as hedge funds piled into the market. Then, on July 17, prices went into a free fall as the funds started to sell.
Traders rushed the cocoa pit. One of them, throwing his arms back and forth and shouting orders, slammed another in the nose and knocked him to one knee.
After the two-day rout, Compagnino and Ragazzo are meeting in East Coast Options' booth on the exchange floor. Ragazzo hands Compagnino a chart tracking the price of cocoa and its 200-day moving-average price, now $1,529.
`Stop Trading!'
After checking London prices, they agree that cocoa has probably hit bottom and is likely to rally toward that average and then trade from $1,527 to $1,537.
A client has called in a sell order, and Compagnino wants to execute the trade above the previous day's closing price.
As trading erupts, Paul Dapolito, a local in a maroon jacket standing next to Compagnino, signals he's buying.
``Seventeen bid for 1,000 Seps!'' Dapolito shouts, moving his arms as if he's raking in the pot in a poker game. He's offering to buy 1,000 September contracts at $1,517.
In response, other traders shout offers to sell at $1,505 and $1,507, signaling with their palms out. No one can agree on price.
``Stop trading! Stop trading!'' shouts Patrick Quinn, the ``head caller'' who referees trading from a perch above the pit.
Quinn points to Dapolito, asks him to repeat his bid, and then points from trader to trader, around the ring, trying to match buyers and sellers and break the logjam. At this point, Compagnino starts selling.
Preordained Move
``All of a sudden you hear that the market is lower than what you expect, so you have to change your mind-set,'' Compagnino says later. ``It was very aggressive selling out there.''
Compagnino says hedge funds were behind the tumult. The number of outstanding cocoa contracts held by hedge funds had jumped 60 percent to 62,029 contracts in the four weeks ended on July 11, according to the CFTC. That combined long position shrank by almost 20,000 contracts, or 30 percent, to 43,349 contracts on July 25.
``This whole move was preordained by the hedge funds' going long and then getting out,'' Compagnino says. He says he was selling for hedge funds himself.
Over in the Nymex natural gas pit, Bolling has had to avoid getting bulldozed by hedge funds.
Bolling has been in the thick of the oil and natural gas rings for almost two decades. A Chicago native, he got into energy trading after he tore his rotator cuff in 1985, ending his hopes for a career in professional baseball.
War and Weather
The father of his girlfriend at the time was an energy trader at now defunct Enron Corp., so Bolling decided to give that a go. After stints as a broker at Prudential Bache Inc. and Shearson Lehman Brothers Inc., he went solo as a local in 1989.
Bolling says he didn't get hooked on the job until January 1991. That month, oil surged 18 percent as the U.S. prepared to go to war with Iraq.
``It was the first time I saw anything move that violently,'' Bolling says. ``It awakened me to the fact that there was tremendous risk -- and opportunity -- in the energy markets.''
Today, Bolling trades other commodities, too, but natural gas is his favorite. Gas is as unpredictable as the weather. More than 20 percent of U.S. electricity is generated by burning the fuel, so heat waves and cold snaps wreak havoc on prices.
Bolling, like many commodity traders, uses past prices to try to predict future prices. ``I cannot manage money without looking at a historic record,'' he says.
Heat Wave
On a late June day, Bolling stares at a number on his computer screen and grins. Crude oil futures are trading at $72.19 a barrel, and natural gas futures are at $5.88 per million British thermal units. The difference -- Bolling's number, $66.31 -- is the widest he's ever seen, he says. So, betting that gas will rise and/or oil will fall, he starts buying gas futures and selling crude contracts. The spread has to narrow, he says.
At first, the trade looks dicey: The spread widens for two weeks. Then, during the week of July 17, a heat wave rolls across the U.S. and demand for power spikes. Natural gas futures climb more than 14 percent on July 31 alone.
Bolling exits his trade on Aug. 3. In all, natural gas prices have shot up 41 percent while oil has gained just 4 percent. Someone who made 10 spread trades like Bolling's would have pocketed $140,000.
During the past year or so, natural gas has been particularly volatile. Prices surged in the months after Hurricane Katrina devastated the U.S. Gulf Coast. Nymex futures rose 42 percent to $15.37 per million BTUs on Dec. 13.
`$1,000 Table'
Later, after traders realized the U.S. was going to have a mild winter, prices plunged 32 percent during the first three months of 2006.
``It's the $1,000 table in the casino,'' Bolling says of natural gas.
Gold has had a rocky run, too, and Grady, who's been trading the metal for 17 years, says he doesn't like to hold positions long.
The price of gold tends to rise in times of political turmoil. There's been plenty of that lately. In April, as North Korea prepared to test long-range missiles and Iran pressed ahead with its nuclear program, gold rose to $654.42 an ounce, up 26 percent for the year.
Then, on May 12, concern that U.S. inflation was accelerating drove the metal to $732, a 26-year high.
Grady, who stands in the same place every day on the top rung of the pit, says he'd never witnessed a run-up like that before. He sold some long positions as soon as gold hit $700.
`Too Far, Too Fast'
``The market had come too far, too fast,'' Grady says. ``It was a market-overboard condition.''
Gold eventually sank to $629.60 on June 1 before rallying again when war broke out in Lebanon. Speculators rushed back into the market. Open interest held by such short-term investors rose to 143,202 on July 18 from 128,310 on June 27, according to the CFTC.
Once again, Grady smelled a sell-off. He says he shorted gold on July 18, and the metal fell 2.6 percent, to $613.20 an ounce, over the next four days.
Like Compagnino, Grady was born in Brooklyn -- in Grady's case, in Bay Ridge, an Irish and Italian neighborhood that's stocked the ranks of the New York police and fire departments for generations.
Grady says he dropped out of St. John's University in Queens, New York, because he decided he didn't want a white- collar desk job. His mother, then a vice president at Refco Inc., the now defunct New York-based futures brokerage, got him a job in Refco's mailroom in 1984.
Three Brothers
``My friends said, `You're out of your mind,''' Grady recalls. ``But I couldn't see myself sitting behind a desk.''
Five years later, Grady became a floor trader for Refco, where his two brothers, Stephen and John, also worked. Refco filed the 15th-biggest bankruptcy in U.S. history in October 2005, a week after disclosing that former Chief Executive Officer Phillip Bennett allegedly concealed $430 million in debt. Bennett pleaded not guilty to federal fraud charges in November 2005 and is awaiting trial. Man Group acquired Refco out of bankruptcy.
So far, prices of industrial metals have held up better than prices of other commodities. Construction in China has spurred record demand for copper, nickel and zinc.
The nickel shortage is especially acute. This year, global stockpiles fell 83 percent to 6,120 metric tons as of Aug. 17, according to the London Metal Exchange. On Aug. 16, the three- month futures contract for the metal, which is used to make stainless steel, blew through the $29,000-per-metric-ton level for the first time.
Red Leather Sofa
Steelmakers have turned to the futures market to obtain immediate deliveries of nickel. You can see the intensity of demand in the trading ring at the LME.
The exchange is an oasis of civility compared with the raucous shoutfests in the New York pits. Traders face each other on a round, red-leather sofa, and must stay seated during trading or pay fines.
They also must wear jackets and neckties and are forbidden from unbuttoning their collars. Profanity is frowned upon. Copper, aluminum, lead, zinc and nickel are traded in five-minute turns.
In August, when nickel was off the charts, traders politely bought and sold futures like it was just another day at the office. Then, in the final 10 seconds of the session, the ring opened to cash bids and offers for immediate delivery.
The traders erupted, yelling buy orders, gesticulating wildly and risking penalties by leaping to their feet.
`Just Nasty'
When demand is low, a commodity's spot price tends to be less than its price for future delivery. Traders call this rising price curve ``contango.'' It reflects the costs of storage and insurance.
When demand is high -- as it has been for nickel lately -- then the opposite happens. The spot price exceeds the future price, a situation known as ``backwardation.''
In August, spot nickel was trading at a 15 percent premium to the three-month contract and a 32 percent premium to the 15- month contract.
``The cash-to-forward price in nickel is just nasty,'' says Russell Plackett, head of metals trading in the London office of Paris-based BNP Paribas SA. In two decades of metal trading, Plackett, 38, has rarely seen spreads like those, he says.
Traders thrive in volatile markets -- provided they bet right. Blowups at hedge fund firms such as Amaranth and MotherRock show what can happen when trades go wrong.
``In big moves, there's always someone who scores huge and someone who gets crushed,'' says Ed Silliere, an independent gold trader on the Nymex. Now that commodity prices have tottered, pit traders can only hope that investors who've rushed into the market won't trample them running for the exits.
To contact the reporter on this story: Edward Robinson in San Francisco [email protected] .