4 ms·

Traders would be correct, in a rational market with perfect information. I'm not always a big fan of behavioral economics, but I think the relationship here is

Traders would be correct, in a rational market with perfect information. I'm not always a big fan of behavioral economics, but I think the relationship here is pretty intuitive. FUD is real and it causes (is?) volatility. We can't get rid of that, but we can at least smooth it out a bit.

londons_explore 7y ago
There are other ways to smooth volatility. For example, you could agree to buy or sell at the average price over the next 30 days.
- XorNot 7y ago
  Someone has to create this as a derivative product though, which has to somehow be normalized against the real assets which are traded.
  - londons_explore 7y ago
    No need. If you want to sell 100 shares at the average price over the next 33 days, just sell 3 per day... You don't need anything fancy.
    - XorNot 7y ago
      Yes you do, because if the market is volatile then depending when you sell the "average" you see can potentially vary widely from what the historical average actually looks like. Sell 3 shares in the morning and hey you're down 7%, sell at mid-day and you might be only down 4%. "Sell at the average over 30 days" changes a lot based on implementation. So now again, you're talking about a derivative product with specific parameters...which in turn, will actually be bid against: if I, another trader, know you're going to reliably put shares up for sale at a certain time each day, then my inclination is to start anticipating sales - and oh look you're now functionally a futures market.
      - chaorace 7y ago
        I'm reminded of this article[1] I read a couple weeks ago... maybe the bond market is a more apt comparison than the stock futures market? [1]: "Why active bond investors can beat the index when active equity investors can’t" The Economist, https://www.economist.com/finance-and-economics/2020/02/27/why-active-bond-investors-can-beat-the-index-when-active-equity-investors-cant https://www.economist.com/finance-and-economics/2020/02/27/w...

londons_explore 7y ago

There are other ways to smooth volatility. For example, you could agree to buy or sell at the average price over the next 30 days.

XorNot 7y ago
Someone has to create this as a derivative product though, which has to somehow be normalized against the real assets which are traded.
- londons_explore 7y ago
  No need. If you want to sell 100 shares at the average price over the next 33 days, just sell 3 per day... You don't need anything fancy.
  - XorNot 7y ago
    Yes you do, because if the market is volatile then depending when you sell the "average" you see can potentially vary widely from what the historical average actually looks like. Sell 3 shares in the morning and hey you're down 7%, sell at mid-day and you might be only down 4%. "Sell at the average over 30 days" changes a lot based on implementation. So now again, you're talking about a derivative product with specific parameters...which in turn, will actually be bid against: if I, another trader, know you're going to reliably put shares up for sale at a certain time each day, then my inclination is to start anticipating sales - and oh look you're now functionally a futures market.
    - chaorace 7y ago
      I'm reminded of this article[1] I read a couple weeks ago... maybe the bond market is a more apt comparison than the stock futures market? [1]: "Why active bond investors can beat the index when active equity investors can’t" The Economist, https://www.economist.com/finance-and-economics/2020/02/27/why-active-bond-investors-can-beat-the-index-when-active-equity-investors-cant https://www.economist.com/finance-and-economics/2020/02/27/w...