I was in the CBOT agricultural futures and options pits. Despite the fact that we had hand signals, yelling and then running over to a broker who had an order you wanted to trade was by far the most popular way for a trade to be executed. Hand signals were more often used for trade confirmations and for communicating with your clerks or trading partners.
Although that scene raises questions though: How did the two of them even get onto the trading floor (e.g. What firm were they with? How were they capital backed?). How did they have enough margin to sell that many futures short? Why was the market seemingly only open 20 minutes?
I guess the implication here is they e.g. sold 10,000 futures short, then re-purchased 10,000 futures to settle it and kept the difference. The problem is that even if you wind up with net 0 futures, you still need to hypothetically cover the short position during the trading day, or you could be violating the law (this is typically via margin, but who agreed to lend the two of them that money?).
Maybe I'm forgetting the part of the movie where they had some rich backer or approached another firm to bankroll them/get them floor access.
PS - The movie is still tons of fun, and I'd recommend it. These unclear details don't really undercut the core message, just odd as they went to pains to get a lot of things right.
The other part of the scene that doesn't make sense to me (unless I'm missing something) is when they first start shorting, it's clear that they're being mobbed by buyers, plus with the people saying "the Mortimers are trying to corner the market! let's get in on it!" it's clear that there are more buyers than sellers, so the price should keep going up. However, once they start shorting, the price starts dropping (starts at 142, then drops to 102). Does this just mean they are shorting between the two of them far more contracts than the market is buying in aggregate? The movie doesn't make this clear.
> you still need to hypothetically cover the short position during the trading day, or you could be violating the law
Selling futures short isn't fundamentally different from opening a long position. It sounds like you're confusing it with some stock market regulation. Though yes, you do need some capital to back your position, and you normally need to be a member of the exchange.
Back in their day, real time tracking of positions was virtually impossible. If someone in the pit was trading in a way that fellow traders thought exceeded his margin capacity, they would call up the clearing firm to tell them to look into it, but that's about it.
The movie showed them getting money from the butler and the prostitute, but I doubt that would have been enough for the size they were doing. But who knows?
Getting badges and floor access that quickly is a huge hole, though.
It's so good because it was filmed on-location in the NYMEX pits before they moved out of the world trade center. Lot's of staff consulted on that part to make it accurate.
