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1) Why? Futures do not prevent the market from "deciding for itself". Global equity markets don't just trade on New York time. Getting rid of futures would not

by dtwest 7y ago

1) Why? Futures do not prevent the market from "deciding for itself". Global equity markets don't just trade on New York time. Getting rid of futures would not fix the problem you are trying to solve, while creating many new problems. 2) If short selling actually did exacerbate the situation, wouldn't that create a buying opportunity for other market participants? In reality, short selling does not systematically force markets to price things incorrectly.

AznHisoka 7y ago
1) I'm not sure about that. I think any pre-market activity influences the price it trades at during the day. For example, if a stock goes up 10% up pre-market because it beats earnings, it usually stays at that price level during the day. Just because people see the price up in pre-market. Same if it goes down. It acts as some sort of marker. It would be interesting to see how prices would be impacted if there were absolutely zero pre-market activity. For instance, if $SPY didn't drop 10% pre-market, and nobody put in any bids/sells yet, would $SPY open at 10% down? If it goes down even more, then so be it. At least, that's what the market wants. Not on an arbitrary marker price they see in pre-market and is stuck in their mind. 2) I think short selling helps misprice stocks in both directions. It creates artificial price increases simply b/c of shorts covering as well. Let stocks go up because more people want to buy it than they want to sell. And let stocks go down because more people want to sell than they want to buy. That's what a market is for other assets - whether it's ebay, amazon, groceries, etc. Don't let other technicalities affect the price.
- dtwest 7y ago
  "For example, if a stock goes up 10% up pre-market because it beats earnings, it usually stays at that price level during the day. Just because people see the price up in pre-market." 1) No, it is not just because people see the price pre-market. It is because it beat earnings. Futures are not an arbitrary marker price. 2) There is so much arbing going on that I don't agree with you.
  - AznHisoka 7y ago
    Fair enough, I respectfully disagree, but you raise some good points.

by dtwest 7y ago

AznHisoka 7y ago

1) I'm not sure about that. I think any pre-market activity influences the price it trades at during the day. For example, if a stock goes up 10% up pre-market because it beats earnings, it usually stays at that price level during the day. Just because people see the price up in pre-market. Same if it goes down. It acts as some sort of marker. It would be interesting to see how prices would be impacted if there were absolutely zero pre-market activity. For instance, if $SPY didn't drop 10% pre-market, and nobody put in any bids/sells yet, would $SPY open at 10% down? If it goes down even more, then so be it. At least, that's what the market wants. Not on an arbitrary marker price they see in pre-market and is stuck in their mind. 2) I think short selling helps misprice stocks in both directions. It creates artificial price increases simply b/c of shorts covering as well. Let stocks go up because more people want to buy it than they want to sell. And let stocks go down because more people want to sell than they want to buy. That's what a market is for other assets - whether it's ebay, amazon, groceries, etc. Don't let other technicalities affect the price.

dtwest 7y ago
"For example, if a stock goes up 10% up pre-market because it beats earnings, it usually stays at that price level during the day. Just because people see the price up in pre-market." 1) No, it is not just because people see the price pre-market. It is because it beat earnings. Futures are not an arbitrary marker price. 2) There is so much arbing going on that I don't agree with you.
- AznHisoka 7y ago
  Fair enough, I respectfully disagree, but you raise some good points.