No one interested in today's version of rip em' a new one? If this keeps up, they'll start developing systems to trade these things. Let's see, if ES drops 15 points in 45 seconds , buy 100 Contracts, sell 30 seconds later at market. I'll have to try that next time.
We're way ahead of you: http://www.elitetrader.com/vb/showthread.php?threadid=19929 http://www.elitetrader.com/vb/showthread.php?threadid=19931 nitro
Wouldn't this be dangerous because you would end up short if they bust the trade? Much better strategy would be to put a position on in a different exchange, eg DAX, FTSE, or even short bonds if they spike in sympathy. I wouldn't be surprised if this is what is going on right now. The guys doing the "erroneous" trades have their limit orders already lined up in a whole host of markets. If the trade gets busted, they make a killing from the sympathy move followed by snapback in related markets. If they don't bust the trade, they probably still make enough money to offset the loss in the manipulated market. An idea might be to have an auto-trader program that leaves limit orders continuously in the eurex products x% below the last price, moved every 30 seconds.
I say enough is enough, we need a complete investigation as to who is doing this, why the markets are so easily porked, and what is planned to prevent reoccurances. At least the volume showed up this time, where it did not in the YM incident. 45k+ contracts in 3 minutes.
The reason for these spikes in the electronic indexes has, IMHO, to do with a flaw in the way the e-contracts are traded that is going to have to be addressed in some manner. There has to be some type of circuit breaker that controls how far out of wack the futures can get from the cash (premium) in the very short run. It takes time to arbitrage things so a stop of one minute when the futures and cash diverge to an extreme would probably allow enough time to arb and to prevent the quick running of stops that contribute to the avalanche. This would be preferable to busting trades after the fact. As I mentioned before, the pit has a natural delay built in to slow down these spikes - the floor traders just put down their arms and stop trading for a minute until they figure out whats going on. The electronic needs to develop something that mimics this unintended shock absorber.
1.) If there is a spike in say the ES, fade the spike but don't trade the source of the spike (in this case ES). Instead trade YM or NQ etc. Otherwise you could end up exposed with a busted trade. 2.) Is it news or is it a mistake/spike? If its a news related move, it would probably happen in all indexes equally to a degree. If its a "fat fingered" spike, the move would happen in one index and then spread to the others. So by monitoring divergences between the indexes, you should be able to determine if the move was news related or a mistake. 3.) Don't leave distant stops in the market. This is a tough one, but if people are allowed to game the indexes with these "mistakes" - you may be better off not having stops in which provide the fuel for these wildfires.
handle this today? I 'll bet if one had a good connection to one of these you would know what the low was in the big contract and be able to act on it in the mini
i said it once and i'll say it again...someone should compile a list of clips that just cover the times when the market went nuts. it would be a great highlight reel to listen to.
The hard part in doing this is that you don't know what caused the spike if it's human error until it hits the wires; by then you have lost most of the edge.
Agree - forget the news, watch the indexes - see if one is initiating the move or if all indexes are moving equally. Of course you have to be quick.