A CNBC article that found its way to the front page of Yahoo Finance today warns of the inevitability of future flash crashes and I, for one, am taking heed. The way I see it, preparedness can mean the difference between absolute slaughter and the opportunity of a lifetime.
The plan is to place buy limit orders at 8%-9% under the current price ranges of select stocks (newly implemented “circuit breakers” will not allow trading in a stock that fluctuates 10% in any given five minute period, so 8%-9% is the best we can do) and wait till the market starts to inexplicably shit blood again. Some poor shmuck’s market order gets served to me on a silver platter, trading in the stock/s is halted till normalcy returns, and then I unload my shares, ideally on the same shmuck I bought them from, and peace the eff out for a long weekend.
So what could go wrong? I guess the next crash might be "real" and not just a flash, in which case my retirement would be postponed indefinitely. Is there any way to minimize that risk and still be in a position to take advantage of flash crash 2.0? Feedback appreciated.
D-O-T-M options with a knock-in feature.
As FX trader said, DOTM options are really your only 'realistic' option and they aren't that realistic since there are the same number of flash crashes in the 'modern' era of trading as there were in the 60s. The article is mostly bullshit. Good luck buying a bunch of DOTM options and giving someone a shit ton of theta for the next many years until it happens.
Here's one:
1) FRE opens the day at 1.22 2)You have a limit of .99c roughly 8-9% 3) You buy at .98c 4) OOOOps Freddie Mac is de-listing from the NYSE
SO, you can wait 5 years and hope that it gets back above a dollar, or you can sell at .40c and loose a ton of money.
It's more likely that the breakers will be triggered due to events than due to an actually "flash crash" and those events could destroy you. The Breakers aren't designed to keep the stock above or below 10%, if the imbalance on the re-open is 50% lower than what it was at the beginning of the day the computers don't care and the market will reopen in 5-10 minutes with the stock trading down 50%.
Look at Freddies Chart form last Wednesday.
stock are going to tumble sometime in the future, so short everything now.
wat
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