trading interview question: How much will this trade affect the price?
30 billion market cap
average volume 500K-1mm
1 week price range $50-$55
Say a client tells you execute a pre-arranged bloc trade of 1.5 mm shares at $48-$49
After the trade, will have the price gone up or down?
not enough information
IME, a block of that size isn't enough to get much attention. I'd say it wouldn't have much of an effect on price at all. But, I suppose the "right answer" is down.
you don't even say if the client is buying or selling...
I assume they are selling as they'd be pretty much SOL if they wanted to buy at $2 below the lowest price in the last week.
Clients have said dumber things before... in that case, the price most likely will drop after the trade. The bank has a 2x ADV position and will be selling @ vwap for weeks.
Who's buying or selling doesn't matter. When a large block is being shopped around the price of a stock will sometimes move against the person seeking liquidity. Occasionally stock prices will move before blocks hit the tape due to information leakage.
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