Interesting movements in spooz last night...

Martinghoul · Sep 24, 2009

Seems like the dump that took place in the last 30 mins of trading was potentially related to the hedging of Jan 1075 puts. Looks like 25k were crossed in the last 10 mins, which is pretty punchy.

FWIW, caveat emptor, usual disclaimers apply...

xflat2186 · Sep 24, 2009

Whey would that indicate a dump? How do you know if they were buy to open, buy to close, sell to open or sell to close. How would you know what was done vs. the trade?

All you know is that a 25k lot traded and at what price, technically you dont even know how long it was shopped or what was done with it and when they were done.

Martinghoul · Sep 25, 2009

AAARGH! I knew I should have kept my mouth shut.

Yes, you're right, technically, I don't know anything... However, as a thinking mkt participant, I try to find rhyme and reason behind the madness, in a probabilistic sense.

Now I see two things:
1) The index sells off arnd 10pts 20 minutes before the close.
2) Roughly $1mm/pt puts get crossed 10 minutes before the close.

I draw my conclusions, I speculate. Now, obviously, I could be wrong. Hence all the usual caveats.

xflat2186 · Sep 25, 2009

The price on those puts may have been agreed on hours before and they just corssed it at that time and it hit the tape then.

I understand your process here but I am warning you its not a sound one since that order may have traded hours before or been linked to a futures price having nothing to do with the move in the market at any given time.

Martinghoul · Sep 25, 2009

Quote from xflat2186:

The price on those puts may have been agreed on hours before and they just corssed it at that time and it hit the tape then.

I understand your process here but I am warning you its not a sound one since that order may have traded hours before or been linked to a futures price having nothing to do with the move in the market at any given time.

Yes, yes, I know all this... Let's assume it's a given that all of these things are not certainties, but rather possibilities. Like a fan chart, y'know, with areas of high and low probability.

Given the conditions above, would you not arrive at a similar distribution?

dmo · Sep 25, 2009

Quote from Martinghoul:

Yes, yes, I know all this... Let's assume it's a given that all of these things are not certainties, but rather possibilities. Like a fan chart, y'know, with areas of high and low probability.

Given the conditions above, would you not arrive at a similar distribution?

I completely agree with xflat on this. If you want to guess the reason any given trade took place, you'll do just as well to flip a coin. I understand how tempting it is to try to make sense of something like that, and as entertainment there's nothing wrong with it, but the harsh truth is you'll never have the slightest idea why.

There are even outfits like Trade the News that cater to the belief that it's helpful to know who's doing what. They sit at pit-side and call out a running commentary on pit action all day long, which house is buying and selling and how much. Trouble is, you have no idea who's really behind the trade or why. If a broker gives up Goldman, you don't know if it's for them or a customer. And even if you did, you don't know what they're spreading it against.

It's really an exercise in futility. Tempting though, I agree.

With options though, you can get a clue by looking at the IV at that strike before and after a big trade. If it stays the same, it was probably a cross and tells you nothing. If it jumps big - especially a few days in a row - THEN you could suspect that volume may mean something.

Martinghoul · Sep 25, 2009

OKI, gents... Yet again then, I'll promise to stop making posts like this.

However, I disagree. I suppose it may be because in my primary mkt there's not that many players and it ALWAYS pays to speculate/guesstimate/wonder who's doing what and why. Occasionally, this information/distribution of possibilities would be a significant part of a trading decision.

dmo · Sep 25, 2009

Quote from Martinghoul:

OKI, gents... Yet again then, I'll promise to stop making posts like this.

However, I disagree. I suppose it may be because in my primary mkt there's not that many players and it ALWAYS pays to speculate/guesstimate/wonder who's doing what and why. Occasionally, this information/distribution of possibilities would be a significant part of a trading decision.

Sure - if it's a small market with few big players and you have a clue from day-to-day participation who's doing what, that would be a different story.

xflat2186 · Sep 25, 2009

Quote from Martinghoul:

Yes, yes, I know all this... Let's assume it's a given that all of these things are not certainties, but rather possibilities. Like a fan chart, y'know, with areas of high and low probability.

Given the conditions above, would you not arrive at a similar distribution?

I would not have at all especially in a market as big and as braod as the SnP500 and all of its off shoots. On occasion in an individual issue which has small volume and OI you might make that leap of faith but IMO that does not apply to most of evrything else.