The Understanding of Commodity Trading at The Chicago Board of Trade

Abstract

This Senior Individualized project is an analysis of the position I held and the knowledge I obtained about futures markets during my summer internship at the Chicago Board of Trade (CBOT). Within this SIP there is also a substantial amount of information that is indirectly related to my winter internship at the CBOT. I made the decision to return to Chicago for my senior project after having a tremendous experience at the CBOT during my winter internship. A friend from Chicago helped me acquire a position on the floor of the CBOT. Goldenberg Hehmeyer & Co is the name of the company I worked for at the CBOT and the title of the position I held was floor clerk. Through the paper I will discuss various parts of my experience in Chicago working at the CBOT. I will start by describing the atmosphere on the floor of the CBOT. It is very important for the reader to comprehend the hostile environment in which I worked. The reason behind this is the atmosphere and intensity on the floor of the CBOT was the primary reason for my return to Chicago. Next I will explain the basic aspects of the position I held on the floor of the CBOT and the concepts learned through holding this position. It will be necessary to go through the learning process of a floor clerk before explaining what the position actually entails. Following the job description I will thoroughly explain the different concepts I learned during my internship pertaining to futures markets and trading. These concepts include the following: margins, trading techniques, hedging, cash vs. futures markets, fundamental analysis, technical analysis, and volume/open interest. After going through the paper, the reader should fully comprehend the energy and uncertainty that goes along with trading commodities. At any given moment a trader can make or lose a fortune. In fact, many of the older brokers have made and lost fortunes repeatedly in their lifetime. The fact that there is no ceiling in the business is extremely appealing to me. Each year a trader can better their previous year's earnings or lose their fortune. A Trader must understand that the possibility of losing it all is lurking behind every move they make. This paper will depict the life of the traders at the CBOT, show the role I played in the open out-cry system, and explain what I learned on the job.