A 1000 point drop in a day?
- Thread starter craigs21
- Start date
i won't say that a 22% drop in today's world is impossible. however, if it happens it won't be for the same reasons of 1987.
1987 was caused largely because institutional investors had computerized trading programs but the nyse (where most stocks were traded then) was still done by pen and paper in the pits. the exchange couldn't handle that many orders per minute, and they could not keep up with the massive inflow of orders. what happened was, futures were dropping very fast that morning, and computerized arb programs were placing market sell orders on dow components without knowing the true price (because quotes were lagged). at one point, the nyse was over one hour behind in processing orders, but even so, traders continued to place market sell orders. this caused a vicious cycle of unabated selling.
i'll say that a 22% drop is unlikely with the measures that are in place now, but 6-10% drops will still happen. we're over due for one.
some trivia: vix hit 145 that day.
:eek:
1987 was caused largely because institutional investors had computerized trading programs but the nyse (where most stocks were traded then) was still done by pen and paper in the pits. the exchange couldn't handle that many orders per minute, and they could not keep up with the massive inflow of orders. what happened was, futures were dropping very fast that morning, and computerized arb programs were placing market sell orders on dow components without knowing the true price (because quotes were lagged). at one point, the nyse was over one hour behind in processing orders, but even so, traders continued to place market sell orders. this caused a vicious cycle of unabated selling.
i'll say that a 22% drop is unlikely with the measures that are in place now, but 6-10% drops will still happen. we're over due for one.
some trivia: vix hit 145 that day.
:eek:
ES futs were down about 100 pts intraday in april 2000
you're sadly mistaken. allow me to burst your bubble.
cme's 5% limit down is only for eht. 10% limit down only halts trading for 10 minutes during normal trading hours. when trading resumes, 20% limit down goes into effect (and would result in halting of trading for 20 minutes) . then 30% limit down for the rest of the trading day.
circuit breakers will not prevent a 22% crash in a day. it will prevent a crash over 30%.