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Isn't that sort of what happened in the "flash crash"? Or was it purely market-makers and algorithms working their way down to 0? Big regulated markets now have
by MichaelGG 9y ago
Isn't that sort of what happened in the "flash crash"? Or was it purely market-makers and algorithms working their way down to 0? Big regulated markets now have circuit breakers to prevent this, unfortunately.
- stale2002 9y agoBut the idea is that you put a buy option at the low price. Ie, you say "I would like to buy 1 million microsoft stock, at the price of 1 cent". The flash crash was cause by stop-loss orders. IE, if the price gets low, then sell. Instead of price gets low, then buy.
- triangleman 9y agoI am not a trader but I believe stock markets take place on an order book with bids at low prices and asks at high prices, with the market clearing in the middle. The upshot of this is that your trade for a million shares will sit on the books like everyone else's, waiting for a seller. If somehow a seller entered a market order to sell 1 million shares for whatever price it can get, and somehow the computer matched it to your order, then that would actually be the last price traded, i.e. a crash. tl;dr: your strategy is more likely to contribute to a stock crashing than you think.
- revmoo 9y agoThat is not at all what options are.