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Hedging Stress

Cigars Ease the Tension for the Big Dogs on Chicago's Futures Exchanges
Alejandro Benes
From the Print Edition:
Pierce Brosnan, Nov/Dec 97

(continued from page 2)

Baldwin began smoking cigars more than two decades ago, after getting his MBA in agribusiness from Santa Clara University. "I used to work in a meat-packing plant, and the general manager and I used to smoke cigars together," Baldwin remembers. "So back then is when I actually started smoking cigars. Usually the biggest one I could find."

Though he wasn't smoking drugstore cigars back then, his taste has improved since. "I don't really smoke the same ones," Baldwin says. "Gloria Cubanas, Davidoffs. I started out smoking Pleiades, then Davidoffs and then Gloria Cubanas and then Cuban cigars, sort of the current fad." The cigars are stored in one of four humidors, one of which, an old Dunhill box full of Cuban La Gloria Cubana Medaille d'Or No. 2s, sits on the credenza in his office.

By 10:30 a.m. on the day of the Greenspan comments, Baldwin has left his office and is in the pit. He just couldn't stay away from the action. Everyone else knows he is there, too. In his chosen field, Tom Baldwin is so successful that other traders honored Baldwin with the creation of a hand signal at the CBOT. The Wall Street Journal described the move as "clerks...furiously brushing their hair back with one hand--pit pantomime for 'bald.' " Baldwin loves it, the trading in particular. The signal comes in handy when Baldwin is trading and others want to follow his moves. "Shadow trading" is what such a maneuver is called.

"Here we go, Baldwin!" shouts trader Steve Horowich.

"Baldwin's a big buyer at 18," interprets Paul Johnson, a broker, after flashing a series of hand signals with Horowich. "I think he bought a thousand." That's 1,000 contracts. At $100,000 per contract, that's $100 million.

Baldwin's presence brings new fervor to the pit. He appears to be picking his spots and many of the traders seem to be looking at him. Baldwin's arms go up, tilted slightly forward, hands cupped downward, inviting others to trade. Suddenly, he spots an opportunity. Baldwin's arms flail, fingers gyrating while signaling, and then the right hand jabs forward with the forefinger pointing across the pit to the trader with whom he has just done the deal. Baldwin quickly records the transaction on a trading card and, without turning, reaches over his right shoulder and hands the card to a clerk. He is calm, his eyes already scanning the pit for the next, um, victim.

While Baldwin is scanning, Jerry Zawaski, a veteran trader, stands outside the pit. He is talking to different people, trying to gauge what's going on. Zawaski is well known to friends around the CBOT as "Zee-Wa," from his badge with the legend "ZWA." The system of using these acronyms--never more than three letters--is vital to tracking the split-second trades Zawaski makes with up to 600 other traders in the T-bond pit. The acronyms, the loud, colorful jackets and the seemingly chaotic process of using hand signals to indicate how many of what commodity a trader wants to buy or sell are all part of what the exchanges call the "open outcry" system.

Standing above the new $182 million, 60,000-square-foot trading floor of the CBOT, the open outcry system looks like a hallucination of oversized peanut M&Ms all fighting to get inside already too-crowded bowls. ZWA has not started trading yet, and some days he simply won't.

Jerry Zawaski was raised in a large family without much money on Chicago's South Side. Now he uses two-dollar bills with his signature on them as a calling card. He tells people the deuce will bring them luck. At 45 years old, Zawaski has more money than he ever thought he would.

"I'm rich," Zawaski says in about as precise a response as he cares to give with respect to where 16 years as a full-time trader of U.S. Treasury bonds has put him and his family on America's socioeconomic ladder. "You never talk about the money and how much is made," Zawaski explains about the trading culture, while on the last throes of a Davidoff Aniversario and driving what he calls his "big-ass black Mercedes," glove compartment stocked with "power snacks" optional. "If someone tells you how much they make, just cut it in half," he adds. "The kitchen in my house," Zawaski will admit somewhat incredulously, "is bigger than the bedroom I shared with five brothers when I was growing up."


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