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Dear Scott & Group,
Perhaps I should also add another impression that I've had after listening to
the Squawk for the last 6 months. There are definitely occasions in the SP pit,
and not that rarely either, whether there seem to be simply no bids or simply no
offers. And, of course, shortly thereafter, the market spikes, either down if
no bids or up if no offers.
The last time that I remember this occurring so obviously was at the close last
Wednesday. What appeared to be happening was that the market had rallied in the
morning, and in the afternoon, the floor was buying all the breaks and
liquidating their longs at the breakout of the morning's high. So by the close,
the floor was all long again, having bought the last break, and now everybody
wanted to liquidate their longs and go flat into the close. The problem was
that there were no buyers, no bids. Whoops, the market sold off almost 5 basis
points with nary an uptick. I'm glad I wasn't long into the close. Had I tried
to exit, I imagine that I would have eaten over $1000 a contract in around 60
seconds --- a pretty expensive lunch, indeed.
Sincerely,
Richard
Scott Hoffman wrote:
> Thanks Richard! That was very interesting.
>
> Here's my 2 cents. I suspect that under 'normal' conditions, the market
> place can absorb huge size without blinking. It's probably a killer though
> during a price shock. For all of us in the futures game, there is probably a
> price shock lurking out there in the future that will ruin us. Liquidity
> goes to zero, price movement goes beyond our wildest dreams. Depending on
> our leverage it will be more probable to some than others. I kind of just
> accept this fact and try to keep the leverage reasonable so that this
> eventuality will most likely not occur in my lifetime. Kind of like being
> struck by lightening. Anything is possible, but if you don't play golf in a
> thunderstorm, it helps. :-)
>
> Scott Hoffman
> Issaquah, WA
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