Uptick rule
- Thread starter drukes1234
- Start date
a true long term investor would not be seeing these intra dayswings because he would be checking prices at most at the end of day if not on a weekly or monthly basis.
you are seeing from an anecdotal view big swings in 20 or 30 minutes time frames . you have not presented any proof that they happened more often since the uptick rule was removed. the fact that stocks move on no news is irrelevant. rumors have always moved stocks.
Ok,
Here is something that I would be amenable to. Just as there are limits in futures, and curbs in the overall stock market, I suggest we do something in the spirit of that rule in stocks.
The uptick rule goes in effect on any stock down more than say 10% on the day for stocks > $30 in price. If the stock rises off that, the uptick rule is no longer in effect. Now investors know not to put in a stop loss between 0% and 10% on a given day. For stocks between 0 and $30, the % should be 30%.
nitro
Here is something that I would be amenable to. Just as there are limits in futures, and curbs in the overall stock market, I suggest we do something in the spirit of that rule in stocks.
The uptick rule goes in effect on any stock down more than say 10% on the day for stocks > $30 in price. If the stock rises off that, the uptick rule is no longer in effect. Now investors know not to put in a stop loss between 0% and 10% on a given day. For stocks between 0 and $30, the % should be 30%.
nitro
I just realized it has to be a little more complex. If the SIFs are down more in % than the stock, then the ut rule is off. So if the overall market is selling off more than the stock, it is silly to say that there is a bear raid on the stock.
So, if minus 10% of Eq < minus % of SIF, then ut rule not in effect, otherwise it is if stock is down more than 10% and SIF > minus 10%.
You don't really need this amendment to my original rule, as imagine DOW down 1200 points, or ES down 120. Do you really need a rule for something that happens once every twenty years in practice, and once every one million years in theory?
nitro
"Stocks pushed down 10% to 20% in 30 minutes" ... ? ? ?
Which stocks?
I can tell you which stocks you ARE NOT talking about ...
We'll make this basic:
List (A) = The stocks where no one has any doubts about the companies ability to survive.
List (B) = The stocks where there are serious doubts about the companies ability to survive.
List (A) companies are stocks like - XOM, GE, MSFT, WMT.
These stocks have not been "pushed down 10% or 20 % in a half an hour ..."
In fact, XOM has traded plus or minus 10% of its July 6, 2007 (the day the uptick rule was removed) settlement price.
That is +/- 10% over 8 MONTHS !!!
You will find that these stocks have something in common.
No one thinks they are going out of business. They are expected to have positive annual EPS. In turn, they have relatively low implied vols
(All implied vol numbers are approximate)
XOM = 30% , GE = 27%, WMT = 26%, MSFT = 34%
Now, these "B" List stocks are stocks where either there are concerns about the firm's ability to survive or absolutey no reasonable clarity about the annual EPS, other than it is likely to be negative.
These are stocks like - MBI, MER, LEH, BSC, WM
You will find that these stocks have something else in common.
Their implied vols are sky high.
MBI = 111%, MER = 108%, LEH = 131%, BSC = 94%, WM = 133%
You asking stocks with triple digit implied vols to trade like some of the safest holdings on the street.
That is beyond delusional.
You are being a motherfucking brat.
To your "long-term investor" issue - the long-term investor's kindly registered rep should have been keeping track of the escalation in the implied vol and should have informed Mr. and Mrs. Long-Term that these holdings were becoming increasing risky ...
Something having to do with a "subprime crisis" ...
The "self-directed" long term investor who held on while these holdings became more and more risky, well, is now "self-fucked."
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It has been a long time since I have read Sheldon Natenberg. Some of you everyday options guys can pick it up from here, if you want.
From what I remember,
1. an implied vol of 100% or more means that the market seriously thinks there is a chance that the stock can be worthless over the next 52 weeks ... True? ... False?
2. Natenberg had a calc for the estimating what a 1 or 2 standard deviation move would look like over a single trading session, given an implied vol #.
"Option Heads" - What would a single session 1 and 2 standard deviation move look like on a stock with 108% implied vol?
Maybe you can use MER as an example ...
It wouldn't surprise me if it looks like exactly what this guy is complainig about.
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Anyway, for you "permabulls" and "long side only traders" - if you are going to be that way, just trade strong companies.
No one says you have to trade these butt-fucked financials.
And if you trade them anyway, don't blame the absence of an "uptick" rule when you get creamed going long a stock that is in a seriously strong downtrend and moving with 100% (or higher) implied volatility.
You and your long side only buddies are basically going for a jog up and down the runways of JFK airport. Don't get mad at the plane for coming down and squishing your head.
It is coming down anyway, whether you are there are not.
And you are not supposed to be there.
One of the top posts I have ever read on this web site.
- Spydertrader
Wow, that's a lot of backlash! I'll give a general explanation of my stance.
-Longer term investors won't see these bear raids as they happen, but they'll feel them when they look at their account at the end of the day to see that their trailing stop got hit 15% below the opening and closing price of the stock. How can you say that that is a fair and orderly market? And unless soemone happened to be watching the stock when the bear raid occurred, there's no way he or she could have known it was going to happen. There is no advance notice to when these raids take place. It's just a sudden spike in selling volume, and it's over within a matter of minutes.
-As for what stocks these bear raids are happening in, sorry but I don't have time to go back and find you specific examples. If this thread is still alive, I'll post up the next bear raid I see. It definitely wasn't isolated to insanely volatile stocks though. If you're someone who watches the market all day every day, you have to have noticed the HUGE increase in the number of stocks that get crushed on no news intraday. That seems to be a pretty good hint that the uptick rule was providing stability.
-If it was so easy to get around the uptick, then what's the big deal if they put it back? All it does is provide stability and order and help to prevent blatant manipulation of the market. What's so bad about that?
-I'll reiterate what I said previously about the SEC's "test" of the market with no uptick: It was conducted during a ridculously strong bull market!! What sense does that make? If they had conducted the test over the last year, then I'd be interested in the results. The test they performed proves nothing.
-Finally, I'm definitely not a perm-bull!! I'm a trader, so I take what the market gives me. The recent volatility has been great. I've made significantly more money in the downward move of the past year than I did in the bullish prior years. I just don't like it when the SEC bends to the will of Wall St and average investors are the ones that foot the bill.
-Longer term investors won't see these bear raids as they happen, but they'll feel them when they look at their account at the end of the day to see that their trailing stop got hit 15% below the opening and closing price of the stock. How can you say that that is a fair and orderly market? And unless soemone happened to be watching the stock when the bear raid occurred, there's no way he or she could have known it was going to happen. There is no advance notice to when these raids take place. It's just a sudden spike in selling volume, and it's over within a matter of minutes.
-As for what stocks these bear raids are happening in, sorry but I don't have time to go back and find you specific examples. If this thread is still alive, I'll post up the next bear raid I see. It definitely wasn't isolated to insanely volatile stocks though. If you're someone who watches the market all day every day, you have to have noticed the HUGE increase in the number of stocks that get crushed on no news intraday. That seems to be a pretty good hint that the uptick rule was providing stability.
-If it was so easy to get around the uptick, then what's the big deal if they put it back? All it does is provide stability and order and help to prevent blatant manipulation of the market. What's so bad about that?
-I'll reiterate what I said previously about the SEC's "test" of the market with no uptick: It was conducted during a ridculously strong bull market!! What sense does that make? If they had conducted the test over the last year, then I'd be interested in the results. The test they performed proves nothing.
-Finally, I'm definitely not a perm-bull!! I'm a trader, so I take what the market gives me. The recent volatility has been great. I've made significantly more money in the downward move of the past year than I did in the bullish prior years. I just don't like it when the SEC bends to the will of Wall St and average investors are the ones that foot the bill.