Who profits from day to day market swings?

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Frisco Kid
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Who profits from day to day market swings?

Post by Frisco Kid »

Can't help but wonder given this years crazy market swings that somebody has got to be profiting almost on a daily basis buying the dips then selling immediately on the upswing? Thought it might make for an interesting discussion so please respond with your thoughts. The big swings this year seem so frequent they are almost commonplace or am I I having a senior moment with brain fade?
fourkids
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Re: Who profits from day to day market swings?

Post by fourkids »

Citadel "execute approximately 39% of all U.S.-listed retail volume" and other hedge funds
https://www.citadelsecurities.com/produ ... d-options/

They make billions just due to volatility
Wakefield1
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Re: Who profits from day to day market swings?

Post by Wakefield1 »

So if someone profits,who loses? I hope it isn't the long time holder.
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cheese_breath
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Re: Who profits from day to day market swings?

Post by cheese_breath »

Let's hope it's not your FA / broker making commissions on every trade while (s)he's trying to time the market with your account.
The surest way to know the future is when it becomes the past.
barnaclebob
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Re: Who profits from day to day market swings?

Post by barnaclebob »

fourkids wrote: Thu Oct 25, 2018 2:59 pm Citadel "execute approximately 39% of all U.S.-listed retail volume" and other hedge funds
https://www.citadelsecurities.com/produ ... d-options/

They make billions just due to volatility
I thought they are just making small fractions on the bid/ask spread no matter if the market goes up or down, not on the big 1% daily changes.
Jags4186
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Re: Who profits from day to day market swings?

Post by Jags4186 »

Buy and holders aren’t the losers—they haven’t sold anything and therefore haven’t realized the loss or participated in the volatility. Yes their asset values have dropped, but they weren’t the cause.

The winners are active fund managers, hedge funds, and individual investors.
The losers are active fund managers, hedge funds, and individual investors.

For every hedge fund, mutual fund, or buddy you hear about doing gangbusters there are plenty that are lagging the market or losing money hand over fist. It’s like listening to gamblers talk about their winnings—they never mention their losing hands.

High speed traders win regardless of the market movement because they are able to see the movements and act on them before normal investors are able to. That has nothing to do with large volatility though—they can do this even during low volatility times.
hdas
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Post by hdas »

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Jags4186
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Re: Who profits from day to day market swings?

Post by Jags4186 »

hdas wrote: Thu Oct 25, 2018 3:17 pm
Jags4186 wrote: Thu Oct 25, 2018 3:12 pm High speed traders win regardless of the market movement because they are able to see the movements and act on them before normal investors are able to. That has nothing to do with large volatility though—they can do this even during low volatility times.
Wrong. > Volatility > Volume > Profits. Of course there's business in non volatile times, but the difference is huge.
Check VIRT
I wasn't referring to magnitude, I was simply referring to the fact that they can make money in any period. Of course they make more money with more volatility. They are probably one of the few "sure things" there is.
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Phineas J. Whoopee
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Re: Who profits from day to day market swings?

Post by Phineas J. Whoopee »

High frequency traders pay enormous sums of money to locate their servers at the exchange's data center. The speed of light in a fiber optic cable means a shorter travel distance results in data getting to their computers slightly earlier than to those physically farther away, and their orders arrive at the exchange slightly sooner.

To take advantage of all that speed they have to buy extremely fast computers, and using their own proprietary software out-compete others who also pay to place their servers in the same room.

I'm not attacking or defending HFTs, just pointing out a bit of physics related to them.

PJW
MathWizard
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Re: Who profits from day to day market swings?

Post by MathWizard »

Frisco Kid wrote: Thu Oct 25, 2018 2:53 pm Can't help but wonder given this years crazy market swings that somebody has got to be profiting almost on a daily basis buying the dips then selling immediately on the upswing? Thought it might make for an interesting discussion so please respond with your thoughts. The big swings this year seem so frequent they are almost commonplace or am I I having a senior moment with brain fade?
"somebody has got to be profiting "

Not necessarily.

In every trade, there is a seller and a buyer.

If you try to make money this way, you would have to have money sitting on the sidelines to you on the dip, and sell back to cash
on the uptick, and then pay short term cap gains on the profit. Most of the time then, you have cach sitting on the sidelines.

You make a little money on the big dips, but lose money to inflation otherwise.

The only people who could do this without sitting on cash all the time would be someone who can take a short term loan at any
time, at basically zero interest rates, and pay it back at the end of the day. Would that be a bank with an intraday loan from the
Fed? Is that allowed under the current financial rules?
hdas
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Post by hdas »

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MathWizard
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Re: Who profits from day to day market swings?

Post by MathWizard »

hdas wrote: Thu Oct 25, 2018 4:25 pm
MathWizard wrote: Thu Oct 25, 2018 4:07 pm The only people who could do this without sitting on cash all the time would be someone who can take a short term loan at any
time, at basically zero interest rates, and pay it back at the end of the day. Would that be a bank with an intraday loan from the
Fed? Is that allowed under the current financial rules?
Lol, you just discovered futures contracts. So with $5000 you can control ~300k notional value of SP500 (INTRADAY).
Good point.
srt7
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Re: Who profits from day to day market swings?

Post by srt7 »

Phineas J. Whoopee wrote: Thu Oct 25, 2018 3:58 pm High frequency traders pay enormous sums of money to locate their servers at the exchange's data center. The speed of light in a fiber optic cable means a shorter travel distance results in data getting to their computers slightly earlier than to those physically farther away, and their orders arrive at the exchange slightly sooner.

To take advantage of all that speed they have to buy extremely fast computers, and using their own proprietary software out-compete others who also pay to place their servers in the same room.

I'm not attacking or defending HFTs, just pointing out a bit of physics related to them.

PJW
This is very interesting to know. Thanks!
I can't think of anything more luxurious than owning my time. - remomnyc
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Phineas J. Whoopee
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Re: Who profits from day to day market swings?

Post by Phineas J. Whoopee »

srt7 wrote: Thu Oct 25, 2018 7:57 pm
Phineas J. Whoopee wrote: Thu Oct 25, 2018 3:58 pm High frequency traders pay enormous sums of money to locate their servers at the exchange's data center. The speed of light in a fiber optic cable means a shorter travel distance results in data getting to their computers slightly earlier than to those physically farther away, and their orders arrive at the exchange slightly sooner.

To take advantage of all that speed they have to buy extremely fast computers, and using their own proprietary software out-compete others who also pay to place their servers in the same room.

I'm not attacking or defending HFTs, just pointing out a bit of physics related to them.

PJW
This is very interesting to know. Thanks!
You're welcome.

If I may add one more point which I should have included in the first place, major exchanges today are publicly-traded corporations on their own and exist for the purpose of profiting their shareholders. Long ago it was their members.

Now it's their shareholders.

Recursive, huh?

PJW
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