NYSE stock question/specialist

I think what you're missing is that trading on the NYSE is about more than just you and the specialist. It's not like the specialist participates in every print, the majority of prints are crosses between customer orders. And when you're talking about fairness in terms of price it has to be fair to both parties involved. When a large market order hits a dried up market and you havea bid or offer in on the opposite side your fill will be price improved accordingly.

Unless you're dealing with a rising market it's also often a better idea to bite the bullet and unload everything in one block since the price you get will usually be better than the average price you'd end up with if you tried to parcel it out. In addition the market impact of large orders in NYSE stocks tends to be much smaller than on Nasdaq stocks with similar liquidity because unlike MMs the specialist is bound by rules to provide an orderly market and can't simply switch into "I buy only 100 shares every half point" mode.

You can't be mad at the specialist for trying to buy low and sell high as long as he doesn't stretch his discretion beyond what constitutes an orderly market. After all just like you he's in this business to make money. But you can easily join him and profit from his moves. With many specialists you can tell beforehand when a large block is about to hit that will gap the price up or down. And with stocks that have the tendency to bounce consistently after such prints you can take advantage of it. RIG and BJS are examples where this works well as long as you only do it in alignment with the stock's and the OSX short-term trend.

 

Take a look at every stock on the NYSE that has had a drop of 80-90%. Do you realize that the specialist was probably the buyer for 70% of that move and it is very possible that he is sitting on some huge losses.

That's the risk he has to take, but it doesn't happen often. The risk is absolutely huge but that is why a specialist is paid so well. You will also notice that when the sellers are finished a small bounce with a lot of size will happen. Guess who is trying to make some of his money back? Pretorian2 tries to play with him on these.

I'm doing the same but I like the opposite end of the spectrum. Look at stocks that have risen 80% with 15 up days in a row (I know there are none now but a few months ago there were). The specialist had to short that stock heavily on the huge upmove as very few sellers around. When the buying mania dies down he's going to gun it down to hit stops. It's how the market works. Going to the area of least resistance. Think of the market of energy just moving around. The specialist just flows with the energy and so do I

Rtharp

 

Qwik nice replies even though I didn't quote you on all. I just wanted to address the last one.

I will add one thing on above. NASDAQ market makers are required to post a 2 sided market since they are on the floor but again they can do it at their price. That's why we tend to drift towards whole #'s. They will buy a stock falling but group together and only each buy as little as they can get away with.

rtharp