~ Chicago Board of Trade

The Important Role of Hand Signals

The use of hand signals is an aspect of futures trading that has always fascinated the public. Surprisingly, the Rules and Regulations of the Chicago Board ofTrade don't specifically require hand signals during open outcry trading. But, in most active markets, hand signals are indispens­able in clarifying verbal bids and offers. Not using hand signals or using them incorrectly can lead to costly mistakes. ·

Hand signals indicate price and quantity as well as whether a trader is buying or selling. A trader has the palm of his hand facing inward if he is buying and outward if he is selling.

BUY

T . l

SELL

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Designating Quantity in Financial and Agricultural Futures and Options

Futures and options traders call out quantity during open outcry trading to indicate the number of contracts they want to buy or sell. To ensure accuracy, they also express quantity through basic hand signals, as illustrated below.

1 CONTRACT 2 CONTRACTS

• •

3 CONTRACTS 4 CONTRACTS

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5 CONTRACTS 6 CONTRACTS

• •

7 CONTRACTS 8 CONTRACTS

• •

9 CONTRACTS 10 CONTRACTS

continued on page 4

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20 CONTRACTS 30 CONTRACTS 80 CONTRACTS 90 CONTRACTS

• • -·-·-·-·-·-• •

40 CONTRACTS 50 CONTRACTS 100 CONTRACTS 1,000 CONTRACTS

• •

60 CONTRACTS 70 CONTRACTS

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Combining Quantities in Financial and Agricultural Futures and Options

To indicate compound quantities, such as 16 contracts or 28 contracts, traders use a combination ofhand signals.

For example, when signaling 16 contracts, the index finger is held vertically to the forehead to indicate 10 contracts, and then the finger is placed horizontally to the chin to indicate 6 contracts~for a total of 16 contracts.

Likewise, for 28 contracts, two fingers are held vertically to the forehead to indicate 20 contracts, and then 3 fingers are held horizontally to the chin to indicate 8 contracts~ for a total of 28 contracts.

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10 CONTRACTS 6 CONTRACTS

10+6=16

20 CONTRACTS 8 CONTRACTS

20 + 8 = 28

Indicating Price in Financial Futures and Options

Futures Pricing in Treasury bonds and 10-year notes is in points and 32nds. Each point is valued at $1,000 and each 32nd at $31.25. Because each interval between 1/32 and 31/32 needs to be signaled, many of the hand signals are repeated at various price intervals. Oftentimes, traders alternate vertical and horizontal gestures to clearly differentiate prices, i.e., 1/32 is indicated by the index finger held vertically, but 6/32 is shown by the index finger held horizontally.

A very common price interval is the move between 31/32 and 1/32. It may be traced and retraced numerous times in a single day. To minimize confusion, it is customary that 31 /32 is signaled with the pinky finger and that 1132 is signaled with the index finger.

When the market is at even, e.g., 106-00, the clenched fist is held vertically and moved from side to side with the thumb extended to clearly indicate a price of even.

It is critical that traders and brokers follow the market carefully and be very clear with their hand signals and open outcry.

1/32,11/32,21/32 2/32, 12/32, 22/32

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3/32,13/32,23/32 4/32, 14/32,24/32

• •

5/32, 15/32, 25/32 6/32,16/32,26/32

• •

7/32, 17/32,27/32 8/32,18/32,28/32

continued on page 10

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9/32,19/32,29/32 10/32, 20/32

• •

j

30/32 31/32

• •

32/32 (EVEN)

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Options Because options are priced in ticks one half the amount of the underlying futures , options on Treasury bond and 10-year note futures are priced in 64ths.

The hand signals for Treasury bond and 1 0-year note options follow the same pattern as the under­lying futures. The additional intervals require that traders be careful to differentiate the prices verbally, using the same signals.

For example:

•

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9/64,19/64,29/64,39/64, 49/64, 59/64

•

Indicating Price in Grain Futures and Options

Generally, traders signal only the last fraction of the whole price. Grain futures are traded in ticks of 1/4 cent per bushel. Options on grain futures use ticks that are half those of the underlying futures. This means ticks in options on soybeans, corn, wheat, and oats are 1/8 cent.

In the grain markets, the price at which a trader is making his bid or offer is usually shown by the fingers held in a horizontal (sideways) position.

Futures

1/4 1/2

• •

3/4 full cent

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Options

1/8 2/8 or 1/4

• . -·-·-·-·-·

3/8 4/8 or 1/2

• . -.-.-.-. -·

5/8 6/8 or 3/4

•

7/8 full cent

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Combining Price and Quantity

Buyers indicate price first and then quantity. Sellers do just the opposite, indicating quantity first and then price.

Traders also use an important verbal distinction that shows if they want to buy or sell. Buyers bid price FOR quantity. Sellers offer quantity AT price.

BOND EXAMPLE

Buyers Bid Price "for" Quantity

9/32 10 CONTRACTS

The outcry would be "9 for 10."

Sellers Offer Quantity "at" Price

10 CONTRACTS 9/32

The outcry would be "10 at 9."

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SOYBEAN EXAMPLE

Buyers Bid Price "for" Quantity

FOR

1/4 CENT 20 CONTRACTS

The outcry would be "114 for 20."

Sellers Offer Quantity "at" Price

I 20 CONTRACTS 1/4 CENT

The outcry would be "20 at J/4."

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Indicating Price in CBOT® DJIAsM Futures

When indicating quantity, CBOT® DJINM futures traders use the standard quantity signals depicted on pages 2 to 7.

CBOT® DJIA5M futures contracts trade in points, with one point valued at $10. A quote of7825, for example, indicates a value of $78,250.

Price is indicated away from the face, using price signals based on the standard financial price signals. Since the point value is only $10, the prices can move quickly and the bid-ask spread can be wide. Therefore, the CBOT® DJINM hand signals are unique in several ways.

It is important for CBOT® DJINM traders to use the last two digits of the price when indicating a bid or offer. For example, if the bid is 7825 and the offer is at 7830, the bid should be indicated by "25" and the offer should be indicated by "30" in both open outcry and hand signals.

First, let's look at signals for prices ending in "0" or "5." Note: When signaling a price ending in "0," the finger(s) starts straight and then is bent down. For prices ending in "5," the finger(s) is bent and wiggled continuously. In these examples, the market is trading in the 7800 range.

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1 Extended finger(s) bent to fist

l Bent and wiggled continuously

7800 7805

• .

1

7810 7815

• .

1

7820 7825

continued on page 18

117

7830 7835 7870 7875

• • . -·-·-·-·-·

l

7840 7845 7880 7885

• • . -·-·-·-·-· -·-·-·-·-·

l

7850 7855 7890 7895

•

7860 7865

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When the price ends in 1, 2, 3, 4, 6, 7, 8, or 9, the trader still has to indicate the last two digits of the price. He does so by making two distinct hand signals while quickly moving his hand from left to right in front of his body.

Following are examples of various bids with the market trading in the 7800 range:

l

7820 bid, or "20 bid"

7823 bid, or "23 bid," moving the same hand in front of his body

7825 bid, or "25 bid"

7828 bid, or "28 bid," moving the same hand in front of his body

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Indicating Price in CBOT® DJIAsM Options

The minimum price fluctuation for a CBOT® DJINM option contract is .05, or $5. Therefore, premiums are quoted in points and .05 increments, and dollar amounts are determined by multiplying the premium by $100. A premium of 15.35 is worth $1,535 and a premium of28.95 is worth $2,895.

Following are illustrations of signals for the .05 increments. Signals that end in "5" are bent and wiggled continuously to differentiate them from the signals that end in "0."

EVEN .05

•

.10 .15

continued on page 22

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.20 .25 .60 .65

• • . . -·-·-·-·-· -·-·-·-·-· • •

.30 .35 .70 .75

• • . -·-·-·-·-· -·-·-·-·-· • •

.40 .45 .80 .85

• • . . -·-·-·-·-· -·-·-·-·-· • •

.50 .55 .90 .95

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When quoting an option 's premium, however, the trader must be careful to quote the whole premium, not just the .05 increment. CBO'f® DJINM option traders incorporate the standard hand signals for quantity (depicted on pages 2 to 7) when signaling price.

The proper way to quote and signal a premium of 15 .35 is:

PREMIUM = 15.35

Likewise, the proper way to quote and signal a premium of 28.95 is:

PREMIUM = 28.95

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Designating Months in Futures and Options

In all futures and options markets, it is some­times necessary to signal the month of the contract traded. Following are some of the hand signals for contract months commonly seen on the trading floor. Signals for months may vary from one contract to another, so it is important to familiarize yourself with the practice in your pit.

The letter symbols for each month are also shown. These symbols are used to designate the month when writing orders and trading cards.

January (F) February (G)

•

March (H) April (J)

continued on page 26

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May(K) June (M)

•

July(N) August (Q)

• . -·-·-·-·-·

September (U) September (U)

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October (V)

December (Z)

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November (X)

• .

EM91-4

© 1995, 1998, Board ofTrade of the City of Chicago

The information in this publication is taken from sources believed to be reliable, but it is not guaranteed by the Chicago Board of Trade as to accuracy or completeness, nor any trading result, and is intended for purposes of information and education only. The Rules and Regulations of the Chicago Board ofTrade should be consulted as the authoritative source on all current contract specifications and regulations.

2.98.5000

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