I started trading commodities in 1987. I became a member of the New York Mercantile Exchange that year and focused most of my attention on crude oil. Since I spent the day in the crude oil pit, I tended to trade mostly crude and the energy-related commodities. During the trading day the audible volume varied but for the most part it was almost impossible to hear


outside the pit.

On occasion, you would hear a swell of volume slowly build to a roar coming from another pit. Many times, it was the result of a refinery fire and the subsequent gasoline pit explosion (pun intended). Or if the daily weather report showed a dramatic surprise change in the 6-10, you might hear the distillate pit volume pick up.

Back then, the Commodity Exchange was an independent exchange trading primarily metals located in the northwest quadrant of the massive 4 World Trade Center trading facility. Nymex occupied the southwest, the Coffee, Sugar and Cocoa Exchange was in the southeast, and the Cotton Exchange was in the remaining northeast quad.

Those were the glory days of commodity trading in New York. Four exchanges trading hundreds of commodities from a shared trading facility. The trading was aggressive with so many traders on one floor, and those traders sharing one set of men's room facilities (99% of floor traders were men, a result of the very physical/violent pits). The cafeteria was dangerous. Fights broke out in the lunchroom, in hallways and I even saw one start in an elevator. The fight finished as the two dudes rolled out into the lobby. I swear this is all true.

Anyway, back then I used to wait for a roar from a pit and wander into it to see what was trading. That's how I found gold. The gold pit was a proud pit. Gold traders were tough as nails. They took no prisoners. To make a long story shorter I started trading gold and platinum because of the roar.

On one occasion, gold was busy and so I went over to the gold pit. It seemed that there were good buyers so I bought gold. As I walked back to Nymex, the gold rally started to fall apart. I was long gold at $404 and it was down below $395. I happened to be walking past platinum (which trades on Nymex) and saw that platinum was selling off too. I sold some platinum to hedge my long gold. Wow! I quickly learned about the volatility of platinum. By the end of the day I had lost $45,000 in gold, but even late to the spread (pair trade) my platinum was up almost double. I then realized that I needed to watch these two distant cousins, traded on different exchanges, for opportunity.

Over my 22 years trading, I have watched the relationship between gold and platinum prices. It is a rare occurrence that platinum, the more precious metal , has traded down to the gold price. It happened in 1987 after the crash. It also happened in 1991 and 1997. But only in 1991 did platinum dip below gold. On all occasions platinum rallied substantially after the parity price. In 1987, platinum went $235 over gold ($635 vs. $400). After a brief week trading parity in 1997, platinum took off and has never looked back, trading a whopping $1165 over gold ($2200 vs. $1035).

It never looked back until last month that is. On Dec. 17, platinum went under gold for the first time since 1997. I was writing and speaking about this earlier in the week and feel that this is a trade with "legs."

The main argument in favor of the trade is that gold has held the distinction of being the safe haven asset during this very tumultuous economic time, while platinum has been on the receiving end of the de-leveraging of assets in hedge funds.

Two weeks ago, I highlighted the trade on "Street Meat," a new segment on my show "Happy Hour" on the Fox Business Network. By the way, the spread between the metals has widened, but there is still room to go. It now sits at $145 (platinum over gold) but spent most of the last decade between $200 and $500. As a point of reference of how strong this spread has been, the 50-week moving average is a whopping $690 and the 200-week moving average is still $583!

Great trading. And as always, trade with your head, not over it.

At the time of publication, Bolling was long platinum futures and short gold futures, although holdings can change at any time.

Eric Bolling is a host on the new Fox Business Network. Bolling was one of the developers and original panelists (nicknamed "The Admiral") on CNBC's "Fast Money."

Bolling is an active trader specializing in commodities, resource trades and ETFs.

Bolling is a member of several exchanges including the New York Mercantile Exchange (NMX), the Intercontinental Exchange (ICE) and the Commodity Exchange of New York.

After spending five years on the board at Nymex, he became a strategic adviser to the board where he assisted in bringing the company public. He has been included in Trader Monthly Top 100 in 2005 and 2006. Bolling was the recipient of the Maybach Man of the Year Award in 2007 for his contribution of philanthropy and willingness to de-mystify investing to Main Street.

Bolling graduated from Rollins College in Winter Park, Fla., and was awarded a fellowship to Duke University. Bolling was an accomplished baseball player. He was drafted by the Pittsburgh Pirates where he played before his career was cut short due to injuries. He honors his baseball past by sporting the Nymex trader badge, R.B.I.