Meet Optiver, High Frequency Trading Friend in Oil
by ilene - September 4th, 2009 4:54 pm
Meet Optiver, High Frequency Trading Friend in Oil
Courtesy of Trader Mark at Fund My Mutual Fund
I’d like to introduce you to a friend in the oil market, named Optiver. This is one of countless HAL9000 high frequency firms who simply make a market and "provide liquidity". The New York Times has a nice piece on this little firm, with the cute name.
- Traders in the Chicago office of Optiver openly talked among themselves of “whacking” and “bullying up” the price of oil. But when called to account by officials of the New York Mercantile Exchange, they described their actions as just “providing liquidity.”
Errr…. Remember, if you ask any questions about the market nowadays, you have an avalanche of people from inside the game telling you all they do is provide liquidity. Without them, we’d be unable to have a functioning market. Countless posts I (and others) put up on sites like Seeking Alpha that even dare to ask about any potential loopholes that some firms in the HAL9000 league could exploit are met with an army of "they just provide liquidity" comments. Almost as if those retorts are organized. Or maybe it’s just the dogma that pervades so much of group think nowadays.
Now of course some of these firms are truly only providing a market making business – skimming off the top and in return "providing liquidity" (in good times at least) [Meet Getco, High Frequency Trading King]. But if one firm like Optiver can manipulate the oil market (allegedly) just imagine what some of the powerful financial elite could do with all the money they have (much of it now backstopped by the Federal Reserve) in all the other markets. Not that they’d ever take advantage of it to post a 97% winning percentage. [Aug 5, 2009: Goldman Sachs Q2 Winning Percentage: 97%] Or more likely (ahem) Optiver was the only bad apple in the bunch…
Wait a second, Larry Summers once worked for a HAL9000 firm DE Shaw learning the tricks of the trade [Apr 6, 2009: Larry Summers – No Conflict of Interest;…
Fibonnaci Stops Rally in China?
by Chart School - August 15th, 2009 6:31 pm
Fibonnaci Stops Rally in China?
Courtesy of Trader Mark at Fund My Mutual Fund
I asked an online buddy, Jeff over at Zentrader.ca, to post a Fibonnaci chart for Shanghai. For those unfamiliar with the mathematician and how it affects stock trading please see [Aug 5, 2009: Fibonnaci Calls: The 38.2% Retrace is Approaching]
Since the main Chinese market dropped 10% from its high, bounced for 1 day (Thursday), and then fell through the 50 day moving average Friday with another 3% loss, I was curious to see what sort of pullback the Fibonnaci "method" would call for.
My request was not specific enough and he actually posted 2 charts, with some quite amazing results.
Here is the chart I actually had been asking for with my vague request for a Fibonnaci chart… after spiking close to 3500, the 3 levels of retrace would show as below. So "best case" if this works out, from the close of 3047 Friday China potentially has another 8.4% to fall according to the Italian methodology. Obviously the pullback could of be of the 50% or 61.8% varieties as well but we’re looking for "best case".
There was nothing amazing about that data… but the other chart he posted, which was not my original request actually makes one shake their head. Remember in that August 5th piece we said the US markets had retraced 38.2% of their 1.5 year drop (October 2007 – March 2008) and it would be a sensible place to pullback if indeed Fibonnaci still rules over HAL9000. Here is what the chart looked like at the time – since then we’ve made a 2nd run at the 38.2% level (1014) middle of last week and then pulled back yet again Friday.
Now for the amazing… China pulled back exactly at its 38.2% retrace as well. Compare this chart below to the one above… striking similarity with about a 2 week lag. (note the US chart is a weekly chart, whereas the Chinese chart is daily – hence why the US one is so compressed)
And after the original pullback (see chart at very top of page) China made a 2nd run at…