Execution edge of pit traders and intraday price ranges of soft commodities

Igor Kliakhandler

Applied Financial Economics, 2007, vol. 17, issue 5, 343-350

Abstract: Intraday activity of open outcry pit traders and mechanics of price formation are important for short-term traders, money managers and regulatory bodies. In particular, congestions of stop-loss and limit orders, as well as subsequent highs/lows of the daily prices are among the most important features traders are interested in. We present a comparison of range-based and close-to-open volatility estimators for US-traded soft physical commodities. The comparison indicates that pit traders are able to identify the congestions of pre-placed stop orders, reach them and liquidate on them, or let the prices run. The comparison also suggests a substantial execution edge of soft commodities pit traders compared to currencies traders.

Date: 2007
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DOI: 10.1080/09603100600690093

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