4 ms·

> The scariest WSJ headline the week prior to when volatility started was the following: "New account creation hits all time high at E-Trade, TD Ameritrade, etc

> The scariest WSJ headline the week prior to when volatility started was the following: "New account creation hits all time high at E-Trade, TD Ameritrade, etc". The WSJ, marketwatch, cnbc, etc writes this every year. # of accounts, margin/debt exposure, etc. They also write how retail investors are missing out. "As Dow Tops 25000, Individual Investors Sit It Out" https://www.wsj.com/articles/as-dow-tops-25000-individual-investors-sit-it-out-1515099703 https://www.wsj.com/articles/as-dow-tops-25000-individual-in... I wouldn't put too much stock in finance newspapers' headlines. They aren't there to give you advice. They exist to sell you ads. > Historically they have been a catalyst of instability and trade solely based on the chart and trends. This is not true. Retail investors don't move markets. Pension funds, hedge Funds, large investors do. And they do so when the FED decides to moves markets ( aka raise or lower interest rates ).

JumpCrisscross 9y ago
> Retail investors don't move markets. Pension funds, hedge Funds, large investors do I used to make equity derivative markets. About thirty minutes after CNBC commented on something, a tsunami of stupid Charles Schwab order flow would hit our systems. It moved prices. Coördinated uninformed flows can dramatically move markets because markets are priced at the margin, not the bulk. TL; DR If both institutions and retail are active in a name, the institutions will set the terms. But if institutions are inactive while retail is active, the latter can move markers surprisingly far.
- dynamodispatch 9y ago
  > I used to make equity derivative markets. By market, I was referring to the stock market. Also, are you claiming to be a market maker? > About thirty minutes after CNBC said something about something, a tsunami of idiotic Charles Schwab and friends order flow would hit our systems. It absolutely moved prices. It doesn't take 30 mins after the news breaks for stocks to move. And the move is usually orchestrated by the big boys and their algos. The herd can certainly follow the move of the big boys as they dump their shares on the late arriving retail investors. But the move is controlled by the big boys and of course the market makers as they tried to leech out as much off the spread as possible. Unless you are referring to lightly traded stocks or OTC stocks with no volume. There isn't much retail trading derivatives. The derivative markets are almost exclusively dominated by hedge funds, banks, large investors.
  - JumpCrisscross 9y ago
    > I was referring to the stock market. Also, are you claiming to be a market maker? I used to be a market maker of stock options, amongst other things. > It doesn't take 30 mins after the news breaks for stocks to move When it comes to markets, test every assumption. In reality, information diffusion is unpredictable and heterogenous [1]. This is due to, in part, the "effects of limited attention in at least part of the population of investors in the market, interacting with some more sophisticated investors with better access to information processing technologies" [2]. > The derivative markets are almost exclusively dominated by hedge funds, banks, large investors Individual stock (versus index) options are actively traded by individual investors [3]. Individual investors also actively trade futures [4]. [1] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.652.1162&rep=rep1&type=pdf http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.652... [2] https://pdfs.semanticscholar.org/b180/3e674cc6be4de275cda1aa0f174c6e44156b.pdf https://pdfs.semanticscholar.org/b180/3e674cc6be4de275cda1aa... [3] https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2013.1841 https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2013.184... [4] https://www.sciencedirect.com/science/article/pii/S1566014116000030 https://www.sciencedirect.com/science/article/pii/S156601411...
    - dragontamer 9y ago
      Options are great, even for individuals. The main issue is that everything is in size 100 lots, so a huge number of stocks are simply "too big" for me to regularly use options on as an individual. If I were to do something like sell a put option on AAPL ($156.41 at the moment) would be $15641 into a single stock that I may have to put up. I'm closer to ~$5000 per trade as an individual, its not like I have as much money as those banks or hedge funds. In short: I'm only really able to buy and sell options on shares with $50 or lower prices. At least with my relatively conservative trading style. But still, selling puts is a cool way to be "paid to be forced to buy a stock", and if you're worried about missing the upswing, you can always sell a put (at the money) + buy a call out of the money. Such a trade benefits from the volatility of the market, and is still strictly safer than owning the stock outright. I mean, I'm a long-term buy-and-hold investor. Selling puts + buying a FOMO out-of-the-money call option is a really good trade most of the time. Given the tradeoffs and the decisions I've made on my portfolio. It basically allows me to benefit from market volatility.

JumpCrisscross 9y ago

> Retail investors don't move markets. Pension funds, hedge Funds, large investors do I used to make equity derivative markets. About thirty minutes after CNBC commented on something, a tsunami of stupid Charles Schwab order flow would hit our systems. It moved prices. Coördinated uninformed flows can dramatically move markets because markets are priced at the margin, not the bulk. TL; DR If both institutions and retail are active in a name, the institutions will set the terms. But if institutions are inactive while retail is active, the latter can move markers surprisingly far.

dynamodispatch 9y ago
> I used to make equity derivative markets. By market, I was referring to the stock market. Also, are you claiming to be a market maker? > About thirty minutes after CNBC said something about something, a tsunami of idiotic Charles Schwab and friends order flow would hit our systems. It absolutely moved prices. It doesn't take 30 mins after the news breaks for stocks to move. And the move is usually orchestrated by the big boys and their algos. The herd can certainly follow the move of the big boys as they dump their shares on the late arriving retail investors. But the move is controlled by the big boys and of course the market makers as they tried to leech out as much off the spread as possible. Unless you are referring to lightly traded stocks or OTC stocks with no volume. There isn't much retail trading derivatives. The derivative markets are almost exclusively dominated by hedge funds, banks, large investors.
- JumpCrisscross 9y ago
  > I was referring to the stock market. Also, are you claiming to be a market maker? I used to be a market maker of stock options, amongst other things. > It doesn't take 30 mins after the news breaks for stocks to move When it comes to markets, test every assumption. In reality, information diffusion is unpredictable and heterogenous [1]. This is due to, in part, the "effects of limited attention in at least part of the population of investors in the market, interacting with some more sophisticated investors with better access to information processing technologies" [2]. > The derivative markets are almost exclusively dominated by hedge funds, banks, large investors Individual stock (versus index) options are actively traded by individual investors [3]. Individual investors also actively trade futures [4]. [1] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.652.1162&rep=rep1&type=pdf http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.652... [2] https://pdfs.semanticscholar.org/b180/3e674cc6be4de275cda1aa0f174c6e44156b.pdf https://pdfs.semanticscholar.org/b180/3e674cc6be4de275cda1aa... [3] https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2013.1841 https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2013.184... [4] https://www.sciencedirect.com/science/article/pii/S1566014116000030 https://www.sciencedirect.com/science/article/pii/S156601411...
  - dragontamer 9y ago
    Options are great, even for individuals. The main issue is that everything is in size 100 lots, so a huge number of stocks are simply "too big" for me to regularly use options on as an individual. If I were to do something like sell a put option on AAPL ($156.41 at the moment) would be $15641 into a single stock that I may have to put up. I'm closer to ~$5000 per trade as an individual, its not like I have as much money as those banks or hedge funds. In short: I'm only really able to buy and sell options on shares with $50 or lower prices. At least with my relatively conservative trading style. But still, selling puts is a cool way to be "paid to be forced to buy a stock", and if you're worried about missing the upswing, you can always sell a put (at the money) + buy a call out of the money. Such a trade benefits from the volatility of the market, and is still strictly safer than owning the stock outright. I mean, I'm a long-term buy-and-hold investor. Selling puts + buying a FOMO out-of-the-money call option is a really good trade most of the time. Given the tradeoffs and the decisions I've made on my portfolio. It basically allows me to benefit from market volatility.