Quote from Kedwards:Hey Urma,If you would be so kind, I wanted to ask you a question on the tape today: Did you see abnormal activity at 10:07-10:08am Eastern Standard Time? I didn't get to watch the tape live today (in class), and of course in hindsight everything looks much clearer, but it seems there was 'unusual' activity at this time.
If you look at the period 10:07:54-10:08:02, there was successive buying right at the highs of the day. I'm looking at 'snapshot' data from Interactive Brokers, and I've heard it's not the best for volume analysis because of this fact, but nonetheless the activity, in anywhere from 30-200 lot size, in those moments seemed peculiar. What has me really stumped is that it was buying, not selling.
Who the f was buying in size at the highs? Edit: Then again, 'size' is relative to the time period I suppose. Anyhow, any insight would be appreciated.
Kedwards,
Thank you for your query.
On our charts the intensity spikes that formed the high of the day actually occurred some 5-6 minutes before the times you mentioned as shown in the first chart below. Times Shown are PST.
One of the dynamics of trade in ES is that it is used as the same vehicle for different purposes. Traders around the world speculate in ES, plus, hedgers and arbitrageurs around the world use ES to hedge portfolios and to do premium arbitrage.
I would suspect that the 30 trades of 200 lots were either long baskets or the reversal of long baskets. In a "basket" trade the arbitrageur will buy stocks that represent an ES contract and then sell that contract short against the stocks. The object is to capture the premium in the future and any dividends in the stocks at expiration or before without market risk.
In the days before there were index options and futres one very common method to capture option premiums was called a conversion where the arb guy would go long the stock, short the call and long the put to capture the difference in premium between the put and the call (in those days call premiums were much fatter than put premiums) and any dividend in the stock.
In this first chart you will see the spikes in commercial speculative trade mentioned above.
Today's trade was truely remarkable and posted the biggest net short by commercial traders we have ever seen.
We track daily net longs and shorts by commercials and today's trade showed a
net short of 188,604 contracts. The closest we can find to that was a
net short of 153,682 contracts which occurred on 2/10 this year amid all that frenzied selling right before the low in March of this year.
This selling was obvious throughout the session as evidenced by the chart and screenshot of the HUD as shown below.
First the commercial sell spikes that occurred some 5-6 minutes before the time you mentioned:
This chart shows today's remarkable commercial selling;
And here is a shot of our HUD which shows the selling which continued throughout the day:
