Moron Program Trader Screws Up Stock Prices At Lunchtime
Daniel Drew, 12/3/2014
People on Wall Street are generally a sophisticated crowd. But sophisticated people can still get drunk at lunch time.
That's the only explanation I can think of when looking at these charts. Some moron filled his order too quickly. You can't put on a huge order in the middle of lunch time. This error costed his fund millions of dollars in transaction expenses because he moved the market so much. The high frequency traders had a field day with this guy.
The only trade that made some kind of sense was Cablevision because the short float on that is 27%, and it's very overextended on the daily chart. That one may have been a short squeeze. But considering the timing of all these trades, the Cablevision trade was probably related to the other ones. There is a possibility that someone got caught in a short squeeze on Cablevision and had to unload unrelated positions to cover their margin calls.
But it could have been worse - like losing $460 million in 1 hour and causing the bankruptcy of your firm, which is what happened at Knight Capital on a nice day in August 2012. You haven't had a bad day on Wall Street until you've lost half a billion.
This just shows the absurdity of the entire system. The value of your retirement, the money you worked so hard for, can drop 3% in 20 minutes because a drunken trader is selling 500,000 shares of Campbell Soup for no reason or to cover bad bets elsewhere in his portfolio. The people who buy Campbell Soup stock aren't exactly people seeking out volatility. But that's exactly what they got.
Welcome to Wall Street.