Judging from his hours, he’s based in the US.
We see you on the bid again, and your cosmetic offers as well. You are the whale in this market, but it’s a small pond. Be careful.
More details on this strange trading later…
Addendum:
Exhibit A: a view of trading known as “market profile” from March 1st through the 7th. Price is on the y-axis and volume is on the x-axis, instead of time. What typically develops on these charts are sideways normal-distribution-like patterns, which is unsurprising by the central limit theorem. Often, a jump to a new mean corresponds to an event. The pattern below is unheard of in liquid markets, except in risk-arb and other “peg”-ish situations.
What first comes to mind is that the exchange is manufacturing volume with bogus “wash” trades, but the first time 33.3 printed (which is where half of the volume for March occurred as of yesterday), the price had been in the teens, and 33.3 marked an all-time high for the contract. This doesn’t make sense as fake volume nor some sort of internal initialization trade relating to TEN’s restructuring.
Yesterday’s trading suggests that a single buyer is pushing the market up and is currently successfully holding it at 40 while posting offers to appear as a passive market-maker. 1-2000 buy orders remained near 40 until about 10pm EST yesterday and returned this morning, EST. In these thin markets, this is quite a lot especially considering the high price level — and it is high since it’s almost a year before the first primary. Of course the recent buyer might be unrelated to whoever caused the anomaly at 33.3. To be continued..
Addendum:
After taking the weekend off, our buyer was back by 10am EDT this morning. He has to defend 33.3 which shouldn’t be too difficult considering that there are only 3 major candidates. Truth be told, 40 isn’t that high for this contract, and the price does more-or-less reflect recent polls, but this guy is awfully confident. There is a fine line between a manipulator and an overconfident trader who is too large for the market.
The order book looks bloody weird. On the bid side, 50 at the high bid of 39.9 (fine), 500 at 38.8, 5098 at 38.0, then 100 on every decimal point from 37.8 down to 37.3. It would take close to $20K to cover that bid at 38, no?
If you come to Intrade with enough money, you can probably negotiate special margin arrangements, but yes the notional value and maximum loss associated with this trader’s position is already quite high, possibly up to $50,000, which is huge for these markets, if tiny for established markets.
Intrade should publish open interest data, which would make what happened at 33.3 much more clear. What is somewhat clear is that our buyer has purchased over 4000 contracts near 40 within the past few days. Given the action at 33.3, his position is conceivably over 15000 contracts. In any case, if there is any negative news on Giuliani, the trader will not be able to exit his position in a timely fashion, at reasonable prices. He is simply too big for the market as it stands. This leads one to think that he is in it for the long haul, willing to risk most of his maximum loss, and much of it to liquidity. And yet he is still buying, with an additional 7000 contracts currently near the bid.
Perhaps he actually knows something and the market is functioning well, reflecting his information. But even if, say, Romney is about to drop out, the buying is very aggressive and he won’t be able to effectively liquidate in any bounce. Perhaps it is an actual hedger? In both these cases, however, why make the pretense of the market-maker spiel? Also, if the trader is someone close to a politician, it is a risk in itself for them to be trading conspicuously on a de facto illegal offshore exchange during US hours.
Selling the Giuliani / McCain spread seems like a good trade, but if you look at the McCain market, less than 150 contracts are offered below 40, which underscores how large our Giuliani trader is.
To clarify, I meant that the exchange should publish overall open interest data (which is required by CFTC-regulated exchanges), not that they should publish individual trader positions, which is unheard of.
Of course the exchange might not want to publish even overall numbers, as that would give less “cover” to their biggest customers.
Check out 2 PM 14 March. A little over $2K in trading in 5 minutes, knocking the price up from 40 to 42. Another $1500 since then keeping it there. Thick order book. Some folks have deeper pockets than I have.