Trading Futures and Options

Nearly all futures and options trading are conducted on computer-based electronic trading systems. However, many of the practices and procedures of electronic trading were borrowed from pit-based open outcry trading, which in the US began in the mid-1800s. All futures and options trading took place in pits or rings located on the trading floor of an exchange. Usually just one commodity was traded in a particular pit, so a trading floor generally had multiple pits. Pit trading is also called open outcry trading because bids – expressions of willingness to buy – and offers or asks – expressions of willingness to sell – were required to be called out loudly and clearly to expose each order to all traders in the pit. The price of each trade, plus changes in the bid and offer prices, was monitored by a pit reporter stationed at a terminal in the trading pit.