Aug

31

Option Quotes, from anonymous

August 31, 2015 |

 The ever investigative Nanex informs us that last Friday:

Some 18 billion options 'quotes', or put another way, some 3 years of quotes for ALL 8000 U.S. stocks, were processed by the infrastructure in one day.

Regrettably, many fewer bargains actually were sealed. The deleterious impact of all this, manifesting itself in many ways, continues to compound inexorably higher in a non linear fashion.

Fascinatingly, to me anyway, is that the coming discontinuity may not be a decline in prices. I begin to speculate and think about how to deal with what this 'event' may entail.

1. A precipitous decline in prices. Well, this would be the consensus for a technologically motivated event.

2. A precipitous rally in prices. A more intriguing possibility. Much thought into how and why.

3. My favorite guesstimate would be the 'bookie's choice'. Something in the order of a 48 hour event with the market starting at X, falling until the final of the three circuit breakers hit throughout the day then next day rallying a similar amount back above X and closing that day back at X.

Take out the longs, take out the shorts, close the period unchanged. Beautiful.

It is important to recognize that these modern day robber barons have no interest–assuming no James Bond villain 'destroy the world' complexes amongst them– in killing the Golden Goose, as it were.

I am reminded of similar sentiments from the Palindrome about markets going to the edge and him not wanting to push them over the edge…

I speculate that the probability of what this post is speculating about varies directly with the probability that the regulators belatedly move in for the kill (via either direct means or pernicious taxation). This may be like Waiting for Godot because, as it currently stands, many ex- regulators now work within these groups so… (I must decide whether to laugh or cry about this ).

One thing comes to mind from all this:

Technology has no memory.


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1 Comment so far

  1. Ferdinand on August 31, 2015 1:44 pm

    So what’s the “right number” of option quotes? And how do the 18 billion quotes harm anyone?

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