Trading -- Institiutional Stop Loss Triggers in SPX, SPY, DIA

GlobalRaider

GlobalRaider

This thread is to discuss institutional behavior in sell-offs, esp. methodologies employed by institutional portfolio managers when placing stop-loss orders. This is an effort to better understand the ratcheting-down of stops in recent 2-sigma downside events, especially 2011, Q4 2014, AUG-2015.

In the midst of a downside event (a broad correction >3%), one would assume the HFT computers would be busy clicking away making distributions in small increments, as they do in normal range trading days. However, looking at the charts from AUG-2015, it would seem the masters of the machines may have interdicted and/or the algorithms had hard stop-loss triggers already programmed in...

So, in setting up a bear options strategy, where does one select strikes for bear put options to mimic the stop triggers used by institutional traders?
 
Further, I want to know how the whales generally select strikes for stop orders so I can develop a complimentary option strategy. I know the answer is probably 1-sigma, 1.5-sigma, 2-sigma,... I thought I'd ask you gents to help me out with your sage wisdom. Thanks!
 
cvds16,
Thanks for responding. You are probably right. I do realize stop strike information is guarded and proprietary to the institutions, so I'm not merely soliciting the easy answer. Perhaps a better question for the sake of discussion is:
"If we were institutional traders, what analytical methods would we use to select strikes for protective stop orders in a 2-sigma downside event?"
 
I'm trying to keep away from placing stops where institutional traders place theirs... A large quantity of stops at one price may generate price slippage due to increased supply at big stop strikes... or stop-running by the machines.

Please share your thoughts on using the following to select stop order placements:
  • Technical indicators, e.g. Fibonacci Retracement, 50-day MA, 200-day MA
  • VIX-adjusted trailing stops
  • Price action indicators
Thank you!
 
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