One of the first things I had to learn when I was starting off brokering oil and gas futures on the energy desk was the futures month codes – symbols for each monthly futures contract.
But first, why use codes or symbols? What’s wrong with just writing out the months (or even abbreviations of the months)?
Basically the reasoning came down to three things – Speed, Space, Sign.
The opening bell would ring (yes markets do open and close, not just run on servers 24/7) and things started happening fast. Phones rang and orders started flowing in fast. Very fast. Everything was fast. The traders spoke fast and I wrote fast. Then they hung up fast and I better have all the relevant information for the order.
I was so focused on getting the order right and not messing up. Then whoever was next to me would ask who the order was for and I wouldn’t have any idea.
Speed. Fast. Got it. Who was that? No idea…
While order tickets up on the trading desk have some extra space, the one’s down on the actual trading floor are made to be held in the palm of your hand.
All of the relevant information for a customer’s order needs to go on that smaller-than-an-index-card order ticket. The system for symbols for each month stemmed from this need to condense abbreviations even beyond three or four letters.
Finally, and most importantly, by standardizing one letter for each month everyone in the futures market, regardless of which product, traders can communicate with each other using sign language. Of course, this isn’t standard sign language, but rather a secret code specific to each exchange that evolved over the years.
Most people interested in the financial markets have at least seen video of people waving their hands at a trader on the other side of the pit. You even use them to communicate with someone on the other side of a trading desk or room.
So what are the monthly futures symbols?
F – January
G – February
H – March
J – April
K – May
M – June
N – July
Q – August
U – September
V – October (written upside down with a line through top so you don’t confuse with Sept)
X – November
Z – December
Product Symbols in Energy
The product symbols in energy are fairly straight forward.
CL – Crude Oil (WTI)
BZ – Crude Oil (Brent)
HO – Heating Oil
RB – Gasoline (used to be HU until transition to RBOB blend)
NG – Natural Gas
There are others for options etc, but these are the basics.
Using these symbols, if you received an order for 100 December 2015 Crude Oil Futures, all you would write is:
“100 Z5CL”, the price, and circle “Buy” or “Sell”
For more on the different signs, TradingPitHistory.com is a fun resource.
The use of hand signals is definitely a bit of a dying art. If you’re interested in learning more about how the trading floor used to look, check out this documentary:
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Featured Image: Commodity Futures Trading courtesy of Lars Ploughmann’s photostream on Flickr.