Can Anyone Explain LOUD stock

Discussion in 'Stocks' started by TurboSetch, Feb 7, 2006.

  1. Been doing record volume 75mil+ every day for a few days. Float is around 114mil. Price will hardly budge. Bids are above ask all day long with BRUT and ARCA having bid sizes in the millions, also above the ask.

    I have been trading the swings on this stock but no news no nothing and insane volume that doesn't move the stock. Really looking for a professional opinion here since all other forums are full of junk.
  2. plugger


    Rebate traders.
  3. Ok rebate traders.. I will have to go read about that ... I have heard the term.

    Anyone else happen to notice this stock. It has been #1 on the naz yesterday I believe for under $2.

    One of the reasons I am trying to understand it is because its very interesting when you watch it. I have been watching charts for a few years now and have never seen this before.
  4. IMO, you should not buy into that stock. It appears that it could be delisted anytime.
  5. They got an extension until july.

    I am only day trading it with a few thousand $.

    Its a crazy ride I will tell you that much. Been able to pull a few hundred out a day most days this week and last week. Buts it can move real fast.

    You should see how predictable it is though with the bids. These ecns line up with a bid size of 2mil, 1mil and just start spinning the volume counter. Then they disappear and I set up some stops for the dip. Buy back when the reverse candle shows on the 15 min chart. Real easy stuff and its just fun money for me on this penny stuff.

    I can't wait to get to the bottom of this. The volume has totaled over 200 million in the last 3 days. The average is I think 3mil.

    Just very interesting to study this and see what happens.
  6. Flat rate brokerage houses are taking a beating as well.

    Notice the 100k+ lots pounding the ineffiecient bid/ask.

    Just imagine, credit trade in 150k lots by pounding yourself in your ameritrade account with flat fees making a few hundred gross and all the credits on the other side while your brokerage is getting owned for credits... what a strategy.
  7. I certainly would not play that game. It seems to be the only explanation so far for the extreme volume and tight spreads that don't seem to move. I was able to find one page with info about this sort of trading and it seems to make some sense. There is very little information I can find on the whole practice in general. Here is the info I found:

    Playing the Rebate Game
    Some ECN traders now rapidly move in and out of liquid positions solely to collect high-volume rebates

    By: A.D. Barber
    Issue: July 2005


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    Discuss this topic: Rebate Trading

    Some traders speculate that as much as one-fourth of the daily volume in certain stocks traded through ECNs stems from a new arb strategy in which prop traders generate volume in exchange for rebates.

    ECNs commonly give rebates for high-volume transactors as a way to create liquidity. So-called "rebate traders" execute large transactions through ECNs in very liquid stocks with low intraday volatility and narrow bid/ask spreads. They rapidly move in and out of these positions, sometimes regardless of minor transaction losses -- purely to generate rebates. With massive leverage and minimal execution costs, traders at some proprietary firms actually grind out a living doing this despite having a flat P&L.

    "So it’s come to this," sighs one equity trader at a major bank. "They can’t figure out any other way to make money in this environment so they sit there arbitraging ECN kickbacks versus the fixed cost per trade cost charged by their clearing firms."

    When asked about the practice, an Archipelago spokesperson was quick to point out that Arca pays rebates to liquidity providers only.

    "On the OTC side, we rebate two mils to liquidity providers and charge three mils to those taking it," she says.

    JDSU, a low priced stock that trades heavily intra day with a spread as low as a penny, is cited as a prime example of a stock heavily traded by rebate desks, according to observers.

    The strategy is not without its risk. A sudden, unexpected event that could interrupt trading would be a disaster for anyone leveraged up. "The rebate game is like anything else," says one trader. "It works until it stops working."

    As they become increasingly competitive in their efforts to recruit traders, proprietary equity firms now advertise minimum capital commitments and higher leverage factors. In the past, proprietary equity firms typically would require a $10,000 opening capital minimum and offer 20 to 1 intra day leverage. Today some firms advertise 30 to 1 leverage and opening capital requirements as low as $2,000.

    For rebate traders, who have tiny risk-reward parameters and generate huge volume, the leverage available can be much higher. Some firms now advertise leverage of as much as 300 to 1 for traders who focus purely on rebate strategies.
  8. Last thought...I wonde if this stock will be halted due to the PR blackout and the unexplained extreme volume.
  9. pbw


    "It has been #1 on the naz yesterday I believe for under $2"

    Loud ended at .69 yesterday -- where are you getting the $2 figure?

    I bought it at .99 and watched it sink it .40 --- hoping for it to hit .99 again so I can get out of it...

    does it have a chance for that or will it get delisted first --
  10. holy crap. i cant remember the last time I saw bids for 4 million shares...all showing! that cant be rebate guys.
    #10     Feb 8, 2006