Last year, an army of day traders turned markets upside down. This year, professional fund managers are finding that they had better keep tabs.
Paywall
https://www.wsj.com/articles/fund-m...tail-day-traders-11642132135?mod=hp_lead_pos7
Last year, an army of day traders turned the markets upside down. This year professional fund managers are looking to keep a better eye.
JPMorgan Chase & Co. introduced a new data product in September that includes information on which individual investors are potentially buying and selling securities, as well as which sectors and shares are talked about on social media. is going The bank says that about 50 customers, including some of the largest asset and volume managers, are testing the product. Equity traders at JP Morgan are also using it to help them manage their risk.
“If you’re a professional investor the inflow from retail isn’t something you can ignore,” says Chris Barthe, global co-head of cash equity trading at JPMorgan. “It’s a whole new investor class that has emerged, and it’s an investor class that’s really getting the topics right.”
crooks run away
This change shows how much the crooks have changed the investment landscape. A year ago, market observers were questioning whether the retail revolution would continue. Now many are asking what it will look like this year.
Millions of Americans, who were sitting at home due to COVID-19, became day traders in 2020, after shunning active investing over the past decade. Fascinated by volatile markets and phone apps that freed it up to trade stocks, they flocked. On social media to invest ideas. That year, he piled on stocks such as Hertz Global Holdings. Inc.
(And eventually rewarded when the car-rental company exited bankruptcy). According to Devin Ryan, director of financial-technology research at JMP Securities, it is estimated that more than 10 million individual investors opened new brokerage accounts in 2020.
Last year 2020 trends accelerated. JMP Securities estimates that another 15 million Americans will sign up for brokerage accounts in 2021. Social-media forums became increasingly used for trading. Some individual investors used their growing numbers to send stocks, including GameStop. Corporation
and AMC Entertainment Holdings Inc.
flight. Many newbies put huge losses on some hedge funds to demonstrate that the traditional playbook isn’t the only way to win.
Investments that made little sense on paper became valuable in 2021 as day traders declared them so. Joke cryptocurrencies such as Dogecoin—more than 1,900% based on last Friday’s levels—became self-proclaimed millionaires in the past year. A market for non-fungible tokens (NFTs), or digital images of objects such as bored-app avatars, exploded.
JPMorgan estimates that individual investors accounted for more than a third of daily trading activity at times over the past 18 months, reaching nearly 40% of shares traded on peak days.
To be sure, many newcomers lost money. Some took out loans without realizing what they were doing, leaving them vulnerable to huge losses when stock prices fell. Risky investment strategies exploded, including options trading. Many amateur investors buy into the buzzed stocks near the top of the rallies, only to see the price drop sharply.
Individual traders purchased a net $292 billion of US stock and exchange-traded funds in 2021, according to Wanda Research’s Wandatrack platform, which tracks and sells data on purchases of US equities by individual investors. This is more than seven times the amount in 2019. Individual investors are now poised to continue with the same level of buying activity in 2022.
Analysts expect the road ahead for US stocks to be better this year, and some money managers believe any prolonged volatility could drive individual investors out of the market. Many say the activity today resembles that of the late 1990s, when individual investors traded only to flee when the dot-com bubble burst.
So far, individual investors have shown a strong stomach for a rough day. Last year, the group’s eight biggest buys by dollar volume occurred when the S&P 500 sank 1.3% or more, Wandtrack data shows. Several academic papers have found that individual investors sometimes help stabilize markets while providing liquidity in times of volatility.
big name notice
By some accounts, novice investors have already replaced the trading strategies of some professional investors. One method in particular: the way some bearish bets do.
There was a high level of short interest in meme stocks like Gamestop before it caught the attention of Reddit traders. This means that other investors—usually professionals, such as hedge funds—were speculating that those stocks would decline. When shorting a stock, an investor borrows shares of a company and sells them, hoping to buy them back at a lower price later.
When amateurs increasingly shipped Gamestop and other shares, short sellers were sometimes forced to buy back the shares, often at very high prices.
According to an analysis by Ihor Dusanivsky, these days, investors are avoiding taking big chances with their short-selling plays. He is Head of Predictive Analytics at S3 Partners, a technology and data analytics firm that closely tracks the activity of small vendors.
Just seven stocks in the US market had short interest of 40% or more at the end of 2021, according to an analysis of their stocks, where at least $10 million of shares were sold short. This was down from 40 shares in early January 2020 and 19 shares in January 2021. And unlike the previous period, none of the stocks in their analysis had a low interest rate of 70% or more at the end of 2021.
Last year, S3 began offering new tools that tell clients which stocks have low interest levels and which may be vulnerable to sudden losses when individual investors pile on.
“The back of every hedge fund’s mind is, ‘I don’t want to be on the wrong side of the meme-stock play,'” says Mr. Dusaniski. “It’s a full-time job to make sure you don’t get hit by a bus.”
Ms. McCabe is a reporter for the Wall Street Journal in New York. He can be contacted at caitlin.mccabe@Businesshala.com.
Paywall
https://www.wsj.com/articles/fund-m...tail-day-traders-11642132135?mod=hp_lead_pos7
Last year, an army of day traders turned the markets upside down. This year professional fund managers are looking to keep a better eye.
JPMorgan Chase & Co. introduced a new data product in September that includes information on which individual investors are potentially buying and selling securities, as well as which sectors and shares are talked about on social media. is going The bank says that about 50 customers, including some of the largest asset and volume managers, are testing the product. Equity traders at JP Morgan are also using it to help them manage their risk.
“If you’re a professional investor the inflow from retail isn’t something you can ignore,” says Chris Barthe, global co-head of cash equity trading at JPMorgan. “It’s a whole new investor class that has emerged, and it’s an investor class that’s really getting the topics right.”
crooks run away
This change shows how much the crooks have changed the investment landscape. A year ago, market observers were questioning whether the retail revolution would continue. Now many are asking what it will look like this year.
Millions of Americans, who were sitting at home due to COVID-19, became day traders in 2020, after shunning active investing over the past decade. Fascinated by volatile markets and phone apps that freed it up to trade stocks, they flocked. On social media to invest ideas. That year, he piled on stocks such as Hertz Global Holdings. Inc.
(And eventually rewarded when the car-rental company exited bankruptcy). According to Devin Ryan, director of financial-technology research at JMP Securities, it is estimated that more than 10 million individual investors opened new brokerage accounts in 2020.
Last year 2020 trends accelerated. JMP Securities estimates that another 15 million Americans will sign up for brokerage accounts in 2021. Social-media forums became increasingly used for trading. Some individual investors used their growing numbers to send stocks, including GameStop. Corporation
and AMC Entertainment Holdings Inc.
flight. Many newbies put huge losses on some hedge funds to demonstrate that the traditional playbook isn’t the only way to win.
Investments that made little sense on paper became valuable in 2021 as day traders declared them so. Joke cryptocurrencies such as Dogecoin—more than 1,900% based on last Friday’s levels—became self-proclaimed millionaires in the past year. A market for non-fungible tokens (NFTs), or digital images of objects such as bored-app avatars, exploded.
JPMorgan estimates that individual investors accounted for more than a third of daily trading activity at times over the past 18 months, reaching nearly 40% of shares traded on peak days.
To be sure, many newcomers lost money. Some took out loans without realizing what they were doing, leaving them vulnerable to huge losses when stock prices fell. Risky investment strategies exploded, including options trading. Many amateur investors buy into the buzzed stocks near the top of the rallies, only to see the price drop sharply.
Individual traders purchased a net $292 billion of US stock and exchange-traded funds in 2021, according to Wanda Research’s Wandatrack platform, which tracks and sells data on purchases of US equities by individual investors. This is more than seven times the amount in 2019. Individual investors are now poised to continue with the same level of buying activity in 2022.
Analysts expect the road ahead for US stocks to be better this year, and some money managers believe any prolonged volatility could drive individual investors out of the market. Many say the activity today resembles that of the late 1990s, when individual investors traded only to flee when the dot-com bubble burst.
So far, individual investors have shown a strong stomach for a rough day. Last year, the group’s eight biggest buys by dollar volume occurred when the S&P 500 sank 1.3% or more, Wandtrack data shows. Several academic papers have found that individual investors sometimes help stabilize markets while providing liquidity in times of volatility.
big name notice
By some accounts, novice investors have already replaced the trading strategies of some professional investors. One method in particular: the way some bearish bets do.
There was a high level of short interest in meme stocks like Gamestop before it caught the attention of Reddit traders. This means that other investors—usually professionals, such as hedge funds—were speculating that those stocks would decline. When shorting a stock, an investor borrows shares of a company and sells them, hoping to buy them back at a lower price later.
When amateurs increasingly shipped Gamestop and other shares, short sellers were sometimes forced to buy back the shares, often at very high prices.
According to an analysis by Ihor Dusanivsky, these days, investors are avoiding taking big chances with their short-selling plays. He is Head of Predictive Analytics at S3 Partners, a technology and data analytics firm that closely tracks the activity of small vendors.
Just seven stocks in the US market had short interest of 40% or more at the end of 2021, according to an analysis of their stocks, where at least $10 million of shares were sold short. This was down from 40 shares in early January 2020 and 19 shares in January 2021. And unlike the previous period, none of the stocks in their analysis had a low interest rate of 70% or more at the end of 2021.
Last year, S3 began offering new tools that tell clients which stocks have low interest levels and which may be vulnerable to sudden losses when individual investors pile on.
“The back of every hedge fund’s mind is, ‘I don’t want to be on the wrong side of the meme-stock play,'” says Mr. Dusaniski. “It’s a full-time job to make sure you don’t get hit by a bus.”
Ms. McCabe is a reporter for the Wall Street Journal in New York. He can be contacted at caitlin.mccabe@Businesshala.com.
