The curse of the fat finger
53 comments / May 6, 2010
Chances are you have had a difficult evening explaining your family members the stress and panic caused by the Dow Jones brief cave of nearly 1000 points. After all, it can’t be important as it hasn’t been on national television. And those gamma, vega and delta positions after a 15% gap down in the morning are hard to estimate and impossible to explain.
Rumor has it a Citi trader confused some figures while entering a trade, but I don’t buy this fat finger theory. Erroneous trade entries can shock markets. However, markets just aren’t supposed to be stable and crashes just happen now and then. Maybe difficult to accept without blaming some clown with fat fingers at Citi. Or the algo trading systems. Or any other quant driven trading machine. Maybe they messed up P&G and Accenture, but the market as a whole was happy to fall.The year 2010 has been fairly quiet so far in derivative trading, with implied volatilities melting away to extremely low levels. If you’re lucky you still have some left, prepare for skyrocketing volatilities.
Anyway – a lot of people must have missed the stock market’s dive altogether. It was the largest absolute drop in the Dow in history, and half of the 1987 crash. Here it is in replay – with Jim Cramer saving the market. (Hat tip to blikopdebeurs.com)
I wasn't actually trading during the lehman collapse but I can tell you that at 7.45pm london time the gbp crosses just went out of bounds, down 7% at one point, ridiculous spreads and vols up the roof…broker market dead, just no bid!
It's quite scary to see there was nothing serious behind that.
In these kind of markets manage your risks prudently can be very costly, lucky my downside wasn't too bad…
so P&G trades down 50% and Accenture trades for 1 cent…Dow ends down 350 and VIX at 32, amazing what a fat finger can do…US markets were due a correction vs some of the Europeans anyway, ridiculous moves today with nothing but lemming robots behind it…if European markets will not be down more than 2 % today
if not today, then next week its going to dip much more than 2%….keep watching !
So, is it a good week for MMs or Otpiver (gamma long, short stock) ?
I don't understand the question 😛
Can't it be a good week for MMs *AND* Optiver? Or are you trying to say something about Optiver's strategy?
Jim Cramer always wants to buy, even when the market was going down in 2008. And that is why he sits in front of the camera and not at a tradingdesk
He used to have its own hedge fund, for some "mysterious" reasons, he's not managing money anymore…no smart money wanna back him!
"BEAR STERNS IS FINE!"
Just wondering how can he still be on the air…
Has it been a good week for the Market Makers in general?
its been a bad week for MM's in Europe not enough money for the move.
I doubt anyone in US made money. Not enough quant traders from co's here.
Since, Optiver topped the P/L scores as mentioned in previous posts, I thought Optiver is the only MM left which is actively trading : The reason why I put "or"…
anyways, how was the week for all MMs in Holland ?
A senior trader from a leading MM told me that "We love downtakes, we always made money there.." Is it true ?
@ 11:04pm
Of course every MM made money, unless they were overall short skew or had a significant premium-short position.
Volume-wise there were, for the first time in months, ample of opportunities.
I don't see why it should have been a bad week for MMs in both Europe and the US, so please explain sir.
did any of the dwarfs get hit this week ?
ao smashed 10 mio eur this week. (5 mio comes from vrijdag).
"Anonymous said…
did any of the dwarfs get hit this week ?
May 8, 2010 11:59 AM "
The new firms with former VDM/Curvalue traders all had a good result.
AO 'smashed' 10mio this week? You mean they lost 10mio? That sounds in general unlikely for a big, diversified MM firm like AO, unless they had big downside risk and vega-short positions in most or at least their major stocks. In which products did they lose this amount?
Can't imagine gamma long Allard lost money.
new topic please…
about: where do the hottest girls of the Dutch trading-community work, and who are they?
so who made money this week? I'm curious.
what you are saying is insane but funny though…I hope you are not that retarded on the video.
@ 3.30pm
AO made 10 mio not lost (even retards can make money in this markt)
give him credit… atleast he has the balls to go live on TV… unlike u loosers
apparently mako made 60m last week!! all their systematic hedging
Wasn't this topic about the curse of the fat finger. One thing is for sure this can never happen to the little man because since ALL Options is heading towards the exit. He is not only eating his fingers but even his entire hand (pretty disgusting)
Bon appetit AJ
Does this happen at any of the market making firms?
Boss Harassed Underling With Porn, Paws, Post-Its
By Bess Levin
Let it be known: if you are not interested in having your supervisor (circle all that apply:) send you videos of himself masturbating, texts about the stuff he wants to do you rife with spelling and grammatical errors, grope you, or leave you lewd notes via Post-It, consider not accepting a gig with Guerreiro Wealth Holdings, where, allegedly, this kind of thing is not frowned upon.
In papers filed in Manhattan Supreme Court, Karen Lo, 20, said she’d only been working at Guerreiro Wealth Holdings for a short period of time when boss Thomas Guerriero sent her the astonishing e-mail “with a link to an obscene pornographic video containing explicit sound and imagery depicting male masturbation and ejaculation” this past Nov. 5. The person is only identified by the tag “stallionman_69,” but Lo “believes the masturbating male, whose face is off-camera, is Guerriero.” The stunned stockbroker texted her boss back a short time later saying “I really can’t mix work with my personal life . . . I really hope this doesn’t affect work.” Guerriero responded hours later, saying, “No that’s fine. I hope we can be friends though,” the suit says. But “the unwelcome sexualized banter” didn’t stop.
In January, he e-mailed her to say he’d gotten drunk at a spa the night before, and wish she’d been there with him. “I would of definitly made you blush I was acrazy mood you would of defintly had alot of fun. I was going to record a video and send it to you but I wasn’t sure how much you liked the last one you asked for. Did you like the last one?”
In February, he sexted her, saying “I wanna take you in the stairwell on the low wat u say . . . I know ul love it. meet me there i wanna touch u already,” the suit says. She said no, and noted she had a boyfriend – but that didn’t stop him. He made fun of the size of her boyfriend’s manhood, and said, “please don’t make me touch myself thinking bou(sic) u.” Lo texted back that she wanted to “keep the whole thing professional.” The suit says he also groped her and left her harassing Post-It notes.
In the event you are interested in all that, please note that the firm is now accepting applications for summer internships and “MBA fellowships.” And also that there’s a thing called The Guerriero Institute, founded by Professor Tom.
nice chickie that Margriet indeed..
hard to believe some of those numbers given that the only real moves were from Thursday onward by which time vol was way bid and most MM's would have sold their long vega out by then…today's move must be a killer for the short gamma players, when will they learn their lesson???
does anyone know where on the Euronext website I can get settlement levels for AEX weeklies and dailies ?
You should be able to find it here http://www.euronext.com/editorial/wide/editorial-2725-EN.html
The origin of the movement down was the massive orders in the Sp mini future (about 10 bn) making the future traded at discount against its fair values. The index arbitrages bought the future and sell the index basket (you need sell the basket to do with Market orders, otherwise you can be hanged in part of your basket) to profit for the discount in the basis relationship btw traded future and fair value of the future.
Without index arbitragers the SP mini future would be down more than 1500 points.
MAY 10, 2010 5:50 PM: you really don't know what you are talking about…stop it.
"Without index arbitragers the SP mini future would be down more than 1500 points." Can i buy it there? -350?
vols crushed or still up ?
a small querry from the Dutch people : meaning of word "Beurs" in English ?
Beurs =
a) stockexchange
b) scholarship
c) wallet
d) damage on skin of apple etc
e) a fair
wie delete elke keer toch die al die comments??????????
@ 11.14pm please explain your comment, are u suggesting it was good to be short gamma over the last few days or that marketmakers would not have sold vega out given the vol spike?
Quite simple to make money in these markets….delta short downward, delta long upward…one of the basics of trading. It is as easy as it looks like.
I know … i know … I know..
Beurs = damage on skin of potato (not apple)
what about IWB??
What about IWB ?
IMC lost the courtcase about the sale of IWB.
http://www.fd.nl/artikel/14929150/beurshuis-imc-rechtszaak-dochter-independent-wholesale-brokerage
Those hedgies did ok, read this:
http://online.wsj.com/article_email/SB10001424052748704879704575236771699461084-lMyQjAxMTAwMDEwMTExNDEyWj.html
>wie delete elke keer toch die al die comments??????????
dat is meneer jack himself. gewoon je eigen comment bewaren (inclusief de timestamp) en opnieuw posten. maar alleen als je hem goed vindt. je kunt ier ook bij schrijven dat je niet wilt dat jack hem weer delete. heb ik laatst gedaan
All market makers (Tibra, Optiver, All Options) made money on the recent inbalance – but the bail out put a stop to that.
are mako really a good market maker… i know they had good guys back on the beurs floor…..
Curious which ones lost money, as this is a zero-sum game
"Tibra, Optiver, All Options"
Is this written in ranking order or inverse alphabetical order ?
one sweet day to go to the office
get ready for a 50% crash stime in 2 years!
in 2 weeks….
i heard about a reversal 50000 call put in the s&p started the action, by an idian hedgefund trader.wether he had to , or he was just brilliant I don`t know.
But after nyse freezed the etf`s made funny prices