How tough to Short a few thousand?

Discussion in 'Order Execution' started by DaveN, Apr 13, 2002.

  1. DaveN


    OK, you may get a chuckle out of this, but my last equity trade was before decimalization.... I've been strictly trading index futures for the last several years, and I'm hopelessly spoiled by the fills in both the ES and NQ.

    Recently however, I've started working with some equity systems to complement my index trading. While these look very good on paper, I *know* the realities will be much different.

    Can anyone give me some real-life expectations for a short trade of say 3000 to 6000 shares? This would be a high volume issue, and preferably NYSE, but also NASDAQ. Since I'm already trading the indicies, SPY, QQQ, DIA, and other ETFs are not what I'm looking at.

    In the first situation, if the trader is retail, then the short entry would be a short sale on an uptick (either on a sale for NYSE or on the bid for NAZ). I know that I could place a limit at the bid or a penny lower to try to get filled. On a typical high volume listed stock, how long would this take to do say 5000 shares? Should I expect to chase the bid down with my limit order by a few pennies, or by tens of pennies?

    Also, if I were to consider becoming a professional trader, then could anyone give me an idea of how that trade might look (slippage and fill time) if I purchased a bullet?

    Thanks in advance for any feedback and information. I realize that things can look great on paper, but the reality of success or failure will lie in these details.
  2. You will have intervening variables to consider. The particular stock, time of day, and imo especially what the overall market happens to be doing when your order is placed.

  3. You will have a tough time "selling short" but you can certainly hit bids using derivatives, etc. If you can short 6,000 at a time, even on listed stocks, you probably will be sorry.
  4. DaveN


    Hi Don,

    Are you referring to making a sale (not short) against a married put? I am curious about this one, as I saw that in your column in TASC this month.

  5. lescor


    I think what Don is saying is that if you can get a 'natural short' off in size on one print, there is probably some buying pressure and the position could be about to go against you. If the stock is quite liquid, you should have no problem hitting bids with bullets for the size you are talking about. Just watch the time and sales of a big stock and you'll see constant prints for several thousand shares.


  6. Naz stocks with high liquidity - 5 million + per day - are easy to short, especailly if you have an auto system that chases the bid down like REDI or ARCA or quickly takes out an uptick. You can place a limit short order for example .15 below the market with a stock that has an ATR of 2-3 and easily get filled. You would be surprised how many buyers there are even on a declining issue. Even at 3-6K. Nonetheless I think that NAZ stocks are best to short after a bounce, if you are scalping.

    NYSE stocks are tougher to naturally short.
  7. Married puts, conversions and the like. You see, you really don't want to go against momentum, which you must if you are actually doing a "short sale" order.

    You never want to have your stock taken from you, or to have stock handed to want to always "initiate" a trade, buy buying up and selling down....this way, you are in charge of your own destiny, and hopefully making the right decision.