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I cant say for a one lot , but I know from having been around so large
traders they will go in and do a what they call " take a shot ". Many
institutional traders trade this way. Just like options if you wait to see
a volatility spike and then sell its to late. So what they do is put a
stupid price out there and " take a shot ". Many times someone who is
inexperienced at another institution who needs to also trade size will take
the trade because it is the only relief he sees in sight in which has size.
There are varying reasons and formulas for " taking a shot " but the most
common is probably gut feel. I have seen some unbelievable things as far as
" taking a shot ". I was working for a huge trader one time and we were on
the opposite side of one of theses trades. One time we had a bunch of bond
calls (over 1000) that closed out of the money by 7 ticks. Well the
settlement of the bonds were on a Sat. at noon. Thinking we had made it
someone went in and paid 7 ticks * 1000 to purchase our out of the money
bond calls. Now who the hell would be so stupid, well we found out that
Monday morning as the Bonds opened and traded a couple of points higher,
that were were now the proud owners of a shit load of futures.
Here is a better story, The Dec. futures of 96 settled on the opening tick.
We had 860 and 855 short calls the market in the overnight closed at 836.
At 8:30 the market opened and traded 864. At that point we were up 8
million for the year. In one tick went from being up 8 million for the year
to being in the " HOLE" 15 million.
Mark Brown
INTERESTING POST ! I just got privately (name withheld below) - and I answer
to the list, to see if others know different or better :-)
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