How to make use of big swings/spikes in Bid/Ask?

Q

Quanto

How to make use of big swings/spikes in Bid/Ask?

The following data is snapshot data on last Friday:
Code: 
Call Strike = 1.0 :

2024-03-08-Fr-093526-EST   S=1.9000   B=0.50   A=1.25   BS=192   AS=120
2024-03-08-Fr-095059-EST   S=1.9600   B=0.80   A=1.10   BS=182   AS=20  
2024-03-08-Fr-100633-EST   S=1.9600   B=0.80   A=1.05   BS=178   AS=1  
2024-03-08-Fr-102206-EST   S=1.9900   B=0.85   A=1.05   BS=124   AS=1  
2024-03-08-Fr-103741-EST   S=1.9000   B=0.75   A=1.05   BS=179   AS=106
2024-03-08-Fr-105314-EST   S=1.8900   B=0.75   A=1.05   BS=210   AS=114
2024-03-08-Fr-110849-EST   S=1.8800   B=0.75   A=1.00   BS=2     AS=20  
2024-03-08-Fr-112424-EST   S=1.8200   B=0.70   A=0.90   BS=5     AS=2  
2024-03-08-Fr-113957-EST   S=1.8000   B=0.70   A=0.90   BS=2     AS=2  
2024-03-08-Fr-115532-EST   S=1.9100   B=0.80   A=1.05   BS=2     AS=106
2024-03-08-Fr-121105-EST   S=1.8300   B=0.70   A=1.00   BS=148   AS=110
2024-03-08-Fr-122641-EST   S=1.8000   B=0.75   A=0.90   BS=2     AS=16  
2024-03-08-Fr-124215-EST   S=1.8100   B=0.70   A=0.90   BS=1     AS=16  
2024-03-08-Fr-125749-EST   S=1.7700   B=0.70   A=0.90   BS=3     AS=20  
2024-03-08-Fr-131324-EST   S=1.8100   B=0.65   A=0.95   BS=199   AS=107
2024-03-08-Fr-132857-EST   S=1.8000   B=0.20   A=0.95   BS=587   AS=109
2024-03-08-Fr-134432-EST   S=1.7900   B=0.60   A=0.95   BS=212   AS=101
2024-03-08-Fr-140005-EST   S=1.8000   B=0.65   A=0.95   BS=200   AS=107
2024-03-08-Fr-141541-EST   S=1.8300   B=0.65   A=0.95   BS=216   AS=31  
2024-03-08-Fr-143114-EST   S=1.8300   B=0.80   A=0.95   BS=2     AS=31  
2024-03-08-Fr-144649-EST   S=1.8400   B=0.65   A=0.95   BS=188   AS=31  
2024-03-08-Fr-150224-EST   S=1.8400   B=0.80   A=0.95   BS=5     AS=33  
2024-03-08-Fr-151803-EST   S=1.8500   B=0.75   A=0.95   BS=2     AS=31  
2024-03-08-Fr-153341-EST   S=1.8700   B=0.30   A=0.95   BS=228   AS=31  
2024-03-08-Fr-154914-EST   S=1.8800   B=0.70   A=0.95   BS=218   AS=21  
2024-03-08-Fr-155247-EST   S=1.8600   B=0.75   A=1.20   BS=5     AS=114

Legend:
S  : Underlying stock price
B  : Bid
A  : Ask
BS : Bid size
AS : Ask size

Question: Why is it not possible to make use of these big price changes? :
Bid 0.20 at 13:28:57
Bid 0.30 at 15:33:41
Ask 1.20 at 15:52:47
Or can one make use of them in some options strategies? Which?
 
Last edited:
Just some ideas:
We need new order types with reversed logic, as addition to the current types:
Code: 
Current order types:
  BUY_TO_OPEN              Ask      (fill happens at >= Ask)
  SELL_TO_CLOSE            Bid      (fill happens at <= Bid)
  SELL_TO_OPEN             Bid      (fill happens at <= Bid)
  BUY_TO_CLOSE             Ask      (fill happens at >= Ask)

Additional order types needed:
  REVERSE_BUY_TO_OPEN      Bid      (fill happens at <= Bid)
  REVERSE_SELL_TO_CLOSE    Ask      (fill happens at >= Ask)
  REVERSE_SELL_TO_OPEN     Ask      (fill happens at >= Ask)
  REVERSE_BUY_TO_CLOSE     Bid      (fill happens at <= Bid)

Then for the said cases one would do:
Code: 
REVERSE_BUY_TO_OPEN the Bid 0.20
REVERSE_BUY_TO_OPEN the Bid 0.30
REVERSE_SELL_TO_OPEN the Ask 1.20

Maybe the birth of "Reversals" or something that :)

Goldman Sachs and others may freely use this idea of mine :)

Such Reversals would help to stabilize the markets by preventing big spikes in Bid/Ask.
B/c now traders would have a method at hand to make use of such big spikes, ie. such market anomalies.

Other technicals:
Maybe we now need to keep book also of these additional values:
Reverse_Volume
Reverse_OpenInterest
But luckily nothing else :-). So this is easily doable.
 
Last edited:
Hmm. the above concept maybe has some bugs... :-(
Will check again...
Yes, is buggy b/c would allow an immediate arbitrage.
Need a different concept...
Back to the drawing board... :)
 
Last edited:
%%
2 proven methods;
1] have a resting order that sells on open price gap;
2] real estate does that all the time, but takes longer LOL.:D:D
Best businesses do that most of the time, like WMT buys by the truck load + sells smaller profits:caution::caution:
 
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