No more option trading for me.

[Fermion]

I think I have managed to move the bid/ask spread on some thinly traded options in the past.

I wanted to sell some $1 calls on a stock that I happen to have in two different broker accounts. The bid was $0.80 and the ask was $1.20 before my order at one broker. I put in an order for $1 and the ask dropped to $1 but nothing filled. I removed the order after 10 minutes and the ask went back to $1.20. I then put a bid order for $0.90 in the other broker account (I would have been ok buying the calls for $0.90 as they had full intrinsic value at that price and I would have just sold my shares in that account). Now the bid went to 0.90 and the ask stayed at $1.20 but the bid order didn't fill. I then jumped to the other account and again offered to sell calls for $1 and had them immediately fill.

It is possible some buyer came along and all of my manipulations didn't actually do anything, but it was interesting. I like to think I screwed over some computer though.

 

[FIRE'd@51]

It was more tempting to put in an order for 100 and see how many contracts I got.

I agree but I didn't want to suggest that.

Do you think a small investor could use this to game the HFT? That is, say you really wanted to sell 5 contracts at 0.65. You put in a bid at 0.65. If the bid (and size) moved up to match yours, you cancel your buy order and immediately put in a sell order with a limit of 0.65. Of course, you would be taking the risk that your bid would be hit.

 

[brewer12345]

I agree but I didn't want to suggest that.

Do you think a small investor could use this to game the HFT? That is, say you really wanted to sell 5 contracts at 0.65. You put in a bid at 0.65. If the bid (and size) moved up to match yours, you cancel your buy order and immediately put in a sell order with a limit of 0.65. Of course, you would be taking the risk that your bid would be hit.

Read what you wrote again. You as a retailer will never be faster than the HFTs. Its possible that they will get tossed out of the market by regulation, but I doubt it. Don't bother with these games.

 

[FIRE'd@51]

Read what you wrote again. You as a retailer will never be faster than the HFTs. Its possible that they will get tossed out of the market by regulation, but I doubt it. Don't bother with these games.

Actually, it wouldn't be the HFT that I would be worried about. The risk to me would be that someone else (possibly another retail investor who wanted to sell) would hit my initlal bid, and I would end up long the contracts I wanted to be short. In fact, I could even get screwed by a fool who happened to put in a market sell order. This is why I wouldn't try this.

Nevertheless, I find it interesting that in Clifp's experiment the offer/size remained at 0.65/2500 after he cancelled his sell order, rather than immediately going back to 0.70, and it appears that he had time to turn around and go the other way had he wanted to.

 

[clifp]

It seems like it probably would work for small contract say 5 or possibly 10.
But, I think you'd have to do a lot of experiment to come up with good answer.

On the other hand if the spread is .60/.70 what I'd really is to understand the true volume, and generally try to get the full $.70

 

[ls99]

IMHO the stock market has alway been corrupt and will remain so as long as there is a market. A few years ago on this forum I mentioned the book By Richard Ney, The Wall street Gang. Written in early 1970ies. A good expose of the shenaningans of that era.

There will be new schemes, of collusion and electronic nature. Just too much money to be made to pass up slick maneuvering.

Remeber the day trading craze, ummm, I think they all got skinned.

 

[imoldernu]

One explanation for the drop in the market last week...

The Real Reason The Market Fell [Dow Jones Industrial Average 2 Minute] | ETF DAILY NEWS

So what’s the REAL reason the market fell?

Well, I think you can rule out fundamental developments. The jobs data wasn’t dismal. There weren’t any major corporate earnings warnings. Russia didn’t invade a new province in the Ukraine, nor did some new emerging market blow up overseas.

Instead, I think it goes back to a simple explanation — fund dumping, particularly hedge funds. One Goldman Sachs report quoted at the financial blog Zero Hedge said that its hedge fund-tracking basket just suffered its worst performance since May 2001.