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  • Markets Aren’t Nice

    Posted by Jonathan on September 13th, 2004 (All posts by )

    Intrade’s contract on Bush’s reelection shortly ago experienced a sudden (and heart-stopping for Bush supporters) price drop from around 62/64 to around 50. When I first noticed it I thought some very bad news must have come out. However, there was no news on Drudge, and a glance at the contract’s intraday price chart showed a spike down, suggesting that someone had come in with a large sale in a thin lunch-time market. The price was already recovering when I started paying attention, and soon returned to around 60 where it is now. It looks like the seller either made a mistake, selected a bad time to initiate or liquidate a position, or was trying to set off stops into a resting bid — IOW, typical short-term market behavior with no long-term implication. Sure scared the crap out of me, though.

    UPDATE: EconoPundit also wants to know what happened.

    UPDATE2: As of around 6:00 PM CST the market has recovered to its pre-spike level, with size bids and offers around 62/64.

    UPDATE3: EconoPundit attributes the spike down to a big seller trying (unsuccessfully) to punish those who bet on Bush.

     

    12 Responses to “Markets Aren’t Nice”

    1. Lex Says:

      Yeah, that was an ugly few moments.

    2. Anonymous Says:

      Iowa had continued to trend higher.

    3. Sylvain Galineau Says:

      Could be bad data too.

    4. Jonathan Says:

      -The Iowa contract is defined differently than Intrade’s, and, more important here, its price is not frequently updated.

      -I don’t think it was bad data. I looked at the contract’s B/A price table as soon as I saw that the mkt had dropped. It was thin. Size bids came in at increasingly high levels as the mkt worked its way back to 60-ish. It behaved exactly like any exchange-traded electronic mkt after a big sell order takes out the resting bids and triggers stops. You get a quick plunge, then confusion, then bids come in and the price slowly returns to slightly below where it was before the event.

    5. Sylvain Galineau Says:

      mmmm…maybe George Soros was getting bored…

    6. aaron Says:

      Maybe some one is taking the gains over the last two weeks and looking for a bigger mover.

    7. Robert Schwartz Says:

      Its 8:20 pm est and the bid is back to 62.4 you could have made some money today.

    8. incognito Says:

      Wouldn’t it make your day if some liberal was shorting Bush futures?

    9. Jonathan Says:

      No, it would make my day if I bought them in the low 50s when the other guys were selling.

    10. aaron Says:

      Coordinated trade, could money be exchanged this way?

    11. Jonathan Says:

      Good question. It would be against Intrade’s rules, as would also be the case at other exchanges, but that doesn’t mean nobody would try to do it.

    12. Andy B Says:

      Jonathan and I were talking about this while it was happening today. It would have made my day if some liberal had punched in a couple too many zeros when they hit the trade button. No “fat finger” functionality on these sites.