4 ms·

Most likely it was all algorithms. You'll note it was a slow downtrend then it hit a window that triggered massive selloff cascade. When it hit the bottom from

Most likely it was all algorithms. You'll note it was a slow downtrend then it hit a window that triggered massive selloff cascade. When it hit the bottom from February the other algorithms were set to buy. I am betting few humans got through an individual order during this. It was mostly software. This is what cause the crash in the eighties, we have some fail-safes in place to slow it but most trading is done by tuned algorithms during stuff like this. In fact, the PPT (Plunge Protection Team) might have kicked in...

nailer 17y ago
I wonder whether a large enough entity could actually deliberately hold and then suddenly sell enough of an instrument they believed to be undervalued, just to ensure their competitors stop losses executed, then immediately buy back the entire market for the instrument.
- eru 17y ago
  You can try. But the strategy is very risky. It's similar to Cornering a market (http://en.wikipedia.org/wiki/Cornering_the_market http://en.wikipedia.org/wiki/Cornering_the_market), but backwards--i.e. short instead of long. If you can pull it off, you have earned your profit.
- prewett 17y ago
  I think Porsche did something like that in 2008: http://radian.org/notebook/porsche http://radian.org/notebook/porsche
  - eru 17y ago
    Not really. Porsche bought lots of VW stock either outright or as a call option. They also lent their VW stock to short-sellers. This way they `recycled' some of their VW stock, because those short-sellers sold to Porsche again. This allowed Porsche to build up a huge position, with only a few willing market participants as counter-parties. They also managed to short-squeeze the short-sellers. (http://en.wikipedia.org/wiki/Short_squeeze http://en.wikipedia.org/wiki/Short_squeeze) The grandparent post described a long-squeeze. (http://en.wikipedia.org/wiki/Long_squeeze http://en.wikipedia.org/wiki/Long_squeeze)

nailer 17y ago

I wonder whether a large enough entity could actually deliberately hold and then suddenly sell enough of an instrument they believed to be undervalued, just to ensure their competitors stop losses executed, then immediately buy back the entire market for the instrument.

eru 17y ago
You can try. But the strategy is very risky. It's similar to Cornering a market (http://en.wikipedia.org/wiki/Cornering_the_market http://en.wikipedia.org/wiki/Cornering_the_market), but backwards--i.e. short instead of long. If you can pull it off, you have earned your profit.
prewett 17y ago
I think Porsche did something like that in 2008: http://radian.org/notebook/porsche http://radian.org/notebook/porsche
- eru 17y ago
  Not really. Porsche bought lots of VW stock either outright or as a call option. They also lent their VW stock to short-sellers. This way they `recycled' some of their VW stock, because those short-sellers sold to Porsche again. This allowed Porsche to build up a huge position, with only a few willing market participants as counter-parties. They also managed to short-squeeze the short-sellers. (http://en.wikipedia.org/wiki/Short_squeeze http://en.wikipedia.org/wiki/Short_squeeze) The grandparent post described a long-squeeze. (http://en.wikipedia.org/wiki/Long_squeeze http://en.wikipedia.org/wiki/Long_squeeze)