Re: REMARKABLE -- United Airlines Stock

[David Farber <dave () farber net>]

Begin forwarded message:

From: Russ Nelson <nelson () crynwr com>
Date: October 1, 2008 8:27:02 PM EDT
To: dave () farber net
Cc: "Peter G. Neumann" <neumann () csl sri com>
Subject: Re: [IP] REMARKABLE --  United Airlines Stock

From: "Peter G. Neumann" <neumann () csl sri com>
>  Last Sale  $320.50
>  Change Net $60.50  -15.89%
>  Today's High/Low $483.63 / $39   [NOT A TYPO]
>
> In a glitch that apparently remains to be explained,
> the stock price took a horrendous dive in the last
> few minutes and then recovered.  Although some people
> tried to profit from it, NASDAQ apparently revoked all
> transactions that occurred during the downward "surge".
>
> TheAustralian.news.com.au blames "Erroneous trades" routed
> to Nasdaq sent Google shares tumbling.  Shares rebounded
> in after-hours trading to $413.06.
>
> I look forward to some detailed explanations for RISKS.

It's not necessarily erroneous trades.  A number of stockholders will
have a stop on their shares, so that they automatically sell if the
price drops below a certain amount, typically 10% or whatever they
think is outside the normal day's range of stock trading.

Other people are interested in buying the stock once its price climbs
out of its normal range.  There's a whole theory ("technical trading")
which tries to predict what is normal, and when a stock is going to
exceed its normal price range.  They have set a limit on the price
they're willing to buy.  When the price goes above that, they buy the
stock.

Sometime mean people will buy a bunch of shares of a stock, then sell
them all at once.  Depending on market conditions, they can depress
the price of the stock enough to hit people's stops, at which point
they sell, which drives the price down further, and further.  The mean
people then buy all the stock back (which takes a lot of cash,
obviously), which sends the price of the stock zooming.

If they're lucky, again, they'll send the price up so high that
they'll start to hit limits, and more and more people will buy the
stock.  The mean people are happy to sell the stock to them.

And when all of this winds down and the price returns to approximately
its original value, both the people with stops and limits are screwed
and the mean people make a lot of money.  Sounds like NASDAQ saw that
happen, and undid it.  Usually the effect is small and the mean people
get away with it.

--  
--my blog is at    http://blog.russnelson.com   | Unregulation is a  
slippery
Crynwr sells support for free software  | PGPok | slope to prosperity  
and
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Potsdam, NY 13676-3213  |     Sheepdog          |




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