Mini Flash Crash

[Ross812]

Look at the S&P Chart. What happened I wonder?

 

http://finance.yahoo.com/q;_ylt=Av9pap2WOnv_FaXiCSKGhTGiuYdG;_ylu=X3oDMTIyMmtqc2VmBG1pdANGaW5hbmNlIEZQIE1hcmtldCBTdW1tYXJ5IDMEcG9zAzIEc2VjA01lZGlhUXVvdGVzTWFya2V0U3VtbWFyeQ--;_ylg=X3oDMTFkcW51ZGliBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3BtaA--;_ylv=3?s=^gspc

[Ross812]

Wow. How tuned to twitter are the high frequency traders?

 

http://www.cnbc.com/id/100664423?__source=yahoo|headline|quote|text|&par=yahoo

[Liberty]

I was going to ask the same thing.

 

I could swear I also saw that very sharp dip in BAC and AIG, but now when I look again I only see a small dip...

 

edit: now the sharp dip is back in BAC in google finance. Weird how it was there and then it wasn't and now it's back.

[Yours Truly]

Saw this under BAC's headlines:

 

Financial stocks bounce back after false report

 

NEW YORK (MarketWatch) -- Financial stocks bounced back after dipping briefly on a false report that the White House was attacked on Tuesday afternoon. The twitter account of the Associated Press was hacked and an incorrect tweet was sent, which the AP says was "bogus". The Financial Select Sector SPDR Fund XLF +1.77% , which tracks financial stocks in the S&P 500 was up 1.6% after dipping 0.6%. Morgan Stanley MS +4.15% was up 3.8% following a fall of 2.6%. Bank of America Corp. /BAC +3.16% was up 3.24% after a drop of 2.04% on the scare. Citigroup Inc. C +2.88% was up 2.8% after dipping 1.7%.

 

[Ross812]

I had a standing limit buy order for AL at $26.50 that got triggered today thanks to the hick-up. In the big scheme of things it doesn't much matter, but it really reveals how precarious our financial market is. 1:07 to 1:11 EST shows the volatility set off by a tweet!

 

 

[twacowfca]

I had a standing limit buy order for AL at $26.50 that got triggered today thanks to the hick-up. In the big scheme of things it doesn't much matter, but it really reveals how precarious our financial market is. 1:07 to 1:11 EST shows the volatility set off by a tweet!

 

 

As someone who has done algorithmic trading in the past ( not to worry, I have successfully completed the 12 step traders anonymous program  :)  I have observed that one of the most successful niches is to trade off extremely negative keywords and phrases immediately when they appear on reputable news feeds.  There is always at least a brief opportunity for profit even when a report  later proves to be unfounded because the market becomes paralyzed.  Productive keywords are terms such as bankruptcy, fraud CEO_____ dies, (immediate) terror/bombing attack.

 

I suspect that alarming terms in the newsfeed(s) triggered initial sell orders without human intervention.  If the false report had not been quickly squelched by AP, today could have been quite ugly.

[Parsad]

It's funny, they are panicking like this with a 120 point drop.  Wait till they see a 2,000 point drop one day!  Cheers!

[meiroy]

It's funny, they are panicking like this with a 120 point drop.  Wait till they see a 2,000 point drop one day!  Cheers!

 

Any day now...

 

The algorithm just became much simpler:

 

0) buy/sell call/puts in advance

1) hack some known twitter account/news site

2) publish news to the upside/downside

3) profit

4) repeat

 

We should see much more of this in the future.

 

[LC]

It might not be a bad idea to put some limit orders for absurdly low prices in as a hedge against this  ;D

[wknecht]

It's funny, they are panicking like this with a 120 point drop.  Wait till they see a 2,000 point drop one day!  Cheers!

 

Any day now...

 

The algorithm just became much simpler:

 

0) buy/sell call/puts in advance

1) hack some known twitter account/news site

2) publish news to the upside/downside

3) profit

4) repeat

 

We should see much more of this in the future.

I might add

5) go to prison disgraced and broke

[ItsAValueTrap]

It might not be a bad idea to put some limit orders for absurdly low prices in as a hedge against this

In the last flash crash, orders that were 30% away from market were cancelled.  So... maybe your amazing trades will be cancelled and the exchange will have screwed you over.

 

This could make a future flash crash a lot worse.  I know I won't be buying on the way down... I do not want to get screwed over by trade cancellations.

[wescobrk]

I second that. Where the hell did they get 30% from? Maybe next time it's 15% or nothing if it's a hated bank stock.

 

Essentially there is an arbitrary put on all stocks from the regulators. The problem is there is no way to value the put. That will impede efficient allocation of capital. No doubt about that.

[Parsad]

It might not be a bad idea to put some limit orders for absurdly low prices in as a hedge against this

In the last flash crash, orders that were 30% away from market were cancelled.  So... maybe your amazing trades will be cancelled and the exchange will have screwed you over.

 

This could make a future flash crash a lot worse.  I know I won't be buying on the way down... I do not want to get screwed over by trade cancellations.

 

Also, you could get screwed over by limit orders if they trigger in a crash, but the market recovers almost immediately or before you have time to do anything.  I'm sure some triggers went off today, and people lost money in just a matter of minutes.  Cheers!

[ItsAValueTrap]

You mean stop orders?