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The Really Useless Thread

  • #146,081
  • Dec 7, 2016 6:37am Dec 7, 2016 6:37am
Quoting Sitting duck
Hi NorthTrader, By reading your post i get the feeling that you think that the institutional traders (smart money) are using the the retail traders (dumb money) as liquidity...
Hi Sitting duck, I think you're right that retail traders' volume is mostly insignificant for the "smart money". But who are the "smart money"? This term seems to be used by people in different ways. For me they are experienced and sophisticated traders who trade large volume. I suspect that not all institutions have traders like this. In fact, if you believe what Anton Kreil (the ex-Goldman Sachs trader) says in his university tour presentations, today's investment bank traders are not very smart at all. They spend most of their time monitoring computer programs! So yes, I'd agree that the "smart money" feeds off the large-volume "dumb money" too, as well as the retail traders. And not all retail traders are dumb of course
You reap what you sow.
  • #146,082
  • Dec 7, 2016 7:02am Dec 7, 2016 7:02am
Quoting goosebone
{quote} I have never understood the (arguably pretty archaic) argument that a large area of land sparsely populated should have the same electoral weight as a smaller area densely populated. Since people, not land are what's being governed, why should land area come into play at all? ....
Do you question the composition of the US Senate where each state --no matter the population-- gets 2 Senators with equal votes to every other state?

Do you question the EU and whether all decisions should be made based on population as opposed to by country? (I.e. should the smaller countries get an equal vote? or should Germany-France-Italy just decide everything since their population is 'over half'?)

Why are you opposed to property owners of larger land areas ---where much of the food and natural resources are gathered from-- having political power?

The idea of the electoral college was essentially the same as the Senate--that while population mass should determine many decisions (i.e. the House of Representatives, based on population) other decisions should be made on political discourse and alignments.
defense wins championships
  • #146,083
  • Edited 8:12am Dec 7, 2016 7:49am | Edited 8:12am
@seemore Do you question the composition of the US Senate where each state --no matter the population-- gets 2 Senators with equal votes to every other state?

Yes I do. So did many of the founding fathers when these provisions were first being drafted and debated. It was a compromise to appease both sides of the argument (representation in the house and Senate.)
From an article in the New Yorker on the subject:
"At the time, the infant nations most populous state had around twelve times as many people as its least populous. To Madison and Hamilton, the idea that one citizen should have twelve times as much representation in the Senate as another citizen, simply because they lived in different places, was self-evidently offensive and absurd. (Two hundred and twenty years later, the absurdity is five and a half times worse: a Wyoming voter gets sixty-eight times more representation in the Senate than a Californian.)"

Do you question the EU and whether all decisions should be made based on population as opposed to by country?
(I.e. should the smaller countries get an equal vote? or should Germany-France-Italy just decide everything since their population is 'over half'?)

Not schooled enough in the subject to give you a good opinion. I would imagine some of the parts that don't compare with the electoral college have to do with the EU being a group of sovereign nations rather that a group of citizens. Although the framers who argued for equal representation for the states in Congress often did so from a viewpoint that seemed to regard the states as sovereign nations themselves at the time so I can see the comparison and would be interested what your thoughts on it are.


Why are you opposed to property owners of larger land areas ---where much of the food and natural resources are gathered from-- having political power?

This doesn't make sense to me as your question is asking about "political power" rather than "more" or "exceptional political power" which is the question at hand. Meaning the question should read:
"Why are you opposed to owners of larger land areas where much of the food and natural resources are gathered from--- having more political power (representation) than their fellow citizens in smaller densely populated areas?"
And if it was I'd answer it:
Because that is antidemocratic and Un-American. And if that's what the rules made with opposite intentions at the start of our Nation have turned out to do, then they should be changed. In this way the Senate is comparable to the EC but not directly, simply due to the existence of the House as a check on the Senate in addition to its contribution to the sum of electors each state gets.

The idea of the electoral college was essentially the same as the Senate--that while population mass should determine many decisions (i.e. the House of Representatives, based on population) other decisions should be made on political discourse and alignments.

Right. The great compromise. It works because you have the balance of the house. Where is the balance for the electoral college?
Or maybe it's better to just ask why, when electing a president would it be sensible to use any other math than the popular vote?
  • #146,084
  • Dec 7, 2016 7:52am Dec 7, 2016 7:52am
Quoting PayTheLimit
Personally I'd rather buy a dip in cable, as I have no idea where support is in the EUR....I'm gonna work some 1.2560 bids in sterling and call it a week...not seeing anything else to do really...
Curious about this one... looking for GBP strength or rather USD weakness for the upcoming months?
  • #146,085
  • Dec 7, 2016 8:24am Dec 7, 2016 8:24am
Quoting goosebone
@seemore Do you question the composition of the US Senate where each state --no matter the population-- gets 2 Senators with equal votes to every other state? Yes I do. ...
At least you are consistent! The states were the equivalent of sovereign nations when they obtained independence, so you have the background. I think the sense of the electoral college is that it prevents regional imbalances of power based on population. Personally, I would not be opposed to a change, it just needs to be done sufficiently in advance of an election so the rules are set and the playing field is even when the race is run. I think this topic has veered far enough from the forex thread, so I'll stop cluttering now.
defense wins championships
  • #146,086
  • Edited 1:14pm Dec 7, 2016 8:30am | Edited 1:14pm
Quoting seemoore
{quote} At least you are consistent! The states were the equivalent of sovereign nations when they obtained independence, so you have the background. I think the sense of the electoral college is that it prevents regional imbalances of power based on population. Personally, I would not be opposed to a change, it just needs to be done sufficiently in advance of an election so the rules are set and the playing field is even when the race is run. I think this topic has veered far enough from the forex thread, so I'll stop cluttering now.
  • #146,087
  • Dec 7, 2016 11:13am Dec 7, 2016 11:13am
Quoting NorthTrader
The main goal of "smart money" is to get in and out at the best possible price, which unfortunately causes maximum pain to the rest of us. They know where most of us put our stops, and they know where the breakout traders are lurking. Because of this it's relatively cheap and easy for them to run the stops and sell all the orders that dumb money is buying (in a short squeeze). .....

At first glance I had assumed you meant that the "smart money" were those who were buying into this almost 300 pip bounce from low 1.050x to high 1.079x (so far), and were buying from those who had sold thinking the drop would continue uninterrupted, ie they buy in anticipation of a bounce helped on by added price rises caused by a short squeeze ..and anyone buying into a 300 pip price rise would appear to be "smart", right!? (in this regard I had assumed your remark that smart money "sell all the orders that dumb money is buying (in a short squeeze)" was just a typo.

However I now feel I may have totally misunderstood your post and that the "smart money" you refer to are as you stated those who are the ones selling to those buying, and are in fact "distributing" in expectation of a further price drop (and are presumably content to incur short term an almost 300 pip rise in the interim?).

I am still a bit muddled by all of this and would welcome your thoughts on the matter or indeed anyone else's too, but is it the case that we have "smart money" availing of a short squeeze and going long into an almost 300 pip bounce, and/or "even smarter money" taking the other side of these trades and actually selling to those going long (distributing) in the hope of even larger rewards due to an even greater anticipated further price drop?
(I use distribution hopefully correctly here as the opposite of accumulation in the case of expected future price rises)

..... confused!
The spoken word is your master, the unspoken word your slave.
  • #146,088
  • Dec 7, 2016 11:20am Dec 7, 2016 11:20am
Waiting for sisse's input for the current flow ... I know he will show up before ecb ... But still want to confirm my flow with his one .... As I am already in 3 cars ....
Re-Incarnated
  • #146,089
  • Dec 7, 2016 12:47pm Dec 7, 2016 12:47pm
The 2/5 discount, etc.....the Electoral College should be scrapped in favor of the popular vote. Acreage doesn't vote: people do.

http://time.com/4558510/electoral-co...story-slavery/
"If The Fool persists in his Folly he will become wise." - William Blake
  • #146,090
  • Dec 7, 2016 3:45pm Dec 7, 2016 3:45pm
could do with some help/explanation if anyone has the time, quiet around here now but any insight helps...
im after explanation of Big option expires and how they affect Fx price..

im with the 10am/3pm london UK usual expiry time...

what i don't totally get is how they affect the price... for example, there was an expiry today, 7th December at 1.0750 for just over 1 billion USD... price at 3pm UK time (10 AM US) was at around 1.0720... i take it the option didn't cash out?

my question is, obviously there must be people of equal/larger size on the other side of the trade...

as soon as the option expired, price just went up and up...

when the option expires... surely the price, in this case, should drop quite a bit? (i.e x amount of trading size just expired... trying to push price up?)

not sure if im even close, like i said, any insight is appreciated
  • #146,091
  • Dec 7, 2016 4:09pm Dec 7, 2016 4:09pm
Quoting Don96
could do
Possibly the level was defended & then large offers were removed at 3:00....just a guess
  • #146,092
  • Dec 7, 2016 4:09pm Dec 7, 2016 4:09pm
There's a whole world of exotic options in the currencies that I know nothing about. No retail access, so no interest. How did you know about the one you mentioned? These are not exchange-traded, so there's no reliable information available to the average trader....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #146,093
  • Edited 5:08pm Dec 7, 2016 4:40pm | Edited 5:08pm
Quoting Don96
could do with some help/explanation if anyone has the time, quiet around here now but any insight helps... im after explanation of Big option expires and how they affect Fx price.. im with the 10am/3pm london UK usual expiry time... what i don't totally get is how they affect the price... for example, there was an expiry today, 7th December at 1.0750 for just over 1 billion USD... price at 3pm UK time (10 AM US) was at around 1.0720... i take it the option didn't cash out? my question is, obviously there must be people of equal/larger size on the...
On a day light in data and any significant market moving events, such as today, a big option expiry can take on significance for very short-term players in FX, acting as a magnet for spot (EURUSD traded at 1.0746 at 2:57 London time, which was 3 minutes before the main options expiration of 10:00 New York).

You will often hear terms such as "the market is long gamma", which broadly means the banks are net long expiring options and commercials or other entities are net short, sitting on the other side of these trades.

Banks love being long gamma and seeing spot move frequently above and below the strike price.

The measure of gamma is highest on the expiration date, when spot is very close to the strike price.

Gamma is often described as the "delta of the delta" - the delta is, simply speaking, a hedge ratio.

So if I am Bank A and I am long a EUR Call expiring today with a 1.0750 strike and the spot price is currently trading at 1.0750 two hours before the expiration time, my delta would be 0.50 (a 50% chance of the option being in-the-money at 10:00 NY time), meaning I need to sell 50% of the EUR notional amount of the option in the spot market to remain fully hedged or delta neutral. Now, say, spot dips to 1.0725 one hour prior to expiry time, my delta could drop to 0.40, meaning I need to buy 10% of the EUR notional amount of the option (effectively partially unwinding my initial 0.50 delta hedge). All the time, as spot moves up and down, I am buying low and selling high; and the more spot moves around the strike price, the more the delta changes and I become more long gamma than before (and a very happy trader).

If I was long a EUR Put in the above example, I would still be happy with lots of gamma, as I would be buying low and selling high on the hedges.

So if the broader market knows that there is a big expiry and it is a light day - in terms of economic data and news - then participants will be anticipating that a major strike may well act as a short-term magnet for price, until the expiration time passes. So this involves traders being induced to mimic, or attempt to front run, the likely actions of the option market makers by (using today as an example) buying when price drifts lower from 1.0750 and starting to sell when price drifts back to the big Strike price.

Once the expiration time has passed, the price is free to move, without any further intervention from option market makers or short term traders.
  • #146,094
  • Edited 5:07pm Dec 7, 2016 4:48pm | Edited 5:07pm
Quoting The Fool
There's a whole world of exotic options in the currencies that I know nothing about. No retail access, so no interest. How did you know about the one you mentioned? These are not exchange-traded, so there's no reliable information available to the average trader....
Occasionally, there will be a talk of "a large barrier or digital expiring", but most large expiring FX Options that are reported on various sites relate to vanilla strikes in the OTC market, using trade data reported to DTCC at inception, which then distributes the information to various sites. The amount quoted relates to the total notional amount of the options expiring, not a payout amount.
  • #146,095
  • Dec 7, 2016 4:52pm Dec 7, 2016 4:52pm
Quoting gammase1
{quote} On a day light in data and any significant market moving events, such as today, a big option expiry can take on significance for very short-term players in FX, acting as a magnet for spot (EURUSD traded at 1.0746 at 2:57 London time, which is 3 minutes before the main options expiration of 10:00 New York). You will often hear terms such as "the market is long gamma", which broadly means the banks are net long expiring options and commercials or other entities are net short, sitting on the other side of these trades. Banks love being long...
okay cheers for that, im still a little lost, but clearer...
here is an image of expiry dates/size on pairs this week...

what is the significance of those 2 EU - trades ... essentially $5 billion pushing us at least below 1.0600 on friday?,,... (net $1.8 billion below 1.06...) so if we start friday above 1.08.... there will be all of those expiry fighting for the 3pm fix?
Attached Image
  • #146,096
  • Dec 7, 2016 5:02pm Dec 7, 2016 5:02pm
Quoting Don96
{quote} okay cheers for that, im still a little lost, but clearer... here is an image of expiry dates/size on pairs this week... what is the significance of those 2 EU - trades ... essentially $5 billion pushing us at least below 1.0600 on friday?,,... (net $1.8 billion below 1.06...) so if we start friday above 1.08.... there will be all of those expiry fighting for the 3pm fix? {image}
A lot can happen tomorrow with the ECB, meaning the market won't be placing any significance on the 1.06 strikes expiring on Friday, unless spot is trading within, say, 40 pips of 1.06 on Friday morning, following a low volatility late session in NY and a similar theme in the Asian session, then one can expect 1.06 to act as a magnet...
  • #146,097
  • Dec 7, 2016 5:07pm Dec 7, 2016 5:07pm
Quoting gammase1
{quote} A lot can happen tomorrow with the ECB, meaning the market won't be placing any significance on the 1.06 strikes expiring on Friday, unless spot is trading within, say, 40 pips of 1.06 on Friday morning, following a low volatility late session in NY and a similar theme in the Asian session, then one can expect 1.06 to act as a magnet...
so if around 1.07 for example, there is going to be a push to get to 1.06 or 1.08? - only one would win if either do? :/
  • #146,098
  • Dec 7, 2016 5:18pm Dec 7, 2016 5:18pm
Quoting Don96
{quote} so if around 1.07 for example, there is going to be a push to get to 1.06 or 1.08? - only one would win if either do? :/
If spot were around 1.07 and the nearest significant expiries were 1.06 and 1.08, then I wouldn't expect the options market to be a meaningful driver on the direction of spot until it gets to within 40 pips of either of these two levels on the day of expiry. Once within 40 pips of either of these levels, and assuming it is a light day for economic data and news, it could be worthwhile, particularly for the short-term trader, to be aware of the expiries and anticipate an increased chance of them being a magnet for price until 10:00 NY time.
  • #146,099
  • Dec 7, 2016 6:49pm Dec 7, 2016 6:49pm
Quoting CommercialB
..... confused!
Yes, it is confusing, and of course none of us know for sure what exactly the smart players are up to. In the short term they are both buying and selling in order to get price where they want it. But they are always thinking ahead and whether they want to be net long or net short the market. My guess is that they are net short on EUR.USD but started taking some off at the lows in order to a) book profit and b) move price higher so they can sell it again at a better price. In doing this they give confidence to bulls, which helps them move price even higher. And it also makes bears jump in (often too early) because they too are attracted to the higher prices. At some point the smart players will start causing pain to the new or existing bears whose stops are too tight - the "soft hands" as sisse calls them - and sell their stops as they run them. So they are increasing their net short position again in anticipation of a further leg down. When it's high enough they'll probably give it one last push up to fill their boat, then sell heavily to initiate the move down. If they've done it right and cleaned up most of the pending buy orders on the way up then price should move down fairly easily with little "resistance" at the support levels.

Anyway, that's one take on it from a bearish perspective. On the other hand, that entire move down to the lows could have been them buying the stops of bottom-picking bulls, in order to change their position from net short to net long in anticipation of a long-term bottom being formed. But I think fundamentals favour a further move down so I'd be inclined to go for the first option described above.

That's just my take on it, and I could be wrong. Please feel free to tear it apart, anyone!
You reap what you sow.
  • #146,100
  • Dec 7, 2016 7:55pm Dec 7, 2016 7:55pm
Quoting NorthTrader
{quote} Yes, it is confusing, and of course none of us know for sure what exactly the smart players are up to. In the short term they are both buying and selling in order to get price where they want it. But they are always thinking ahead and whether they want to be net long or net short the market. My guess is that they are net short on EUR.USD but started taking some off at the lows in order to a) book profit and b) move price higher so they can sell it again at a better price. In doing this they give confidence to bulls, which helps them move...
Thanks so much NT for that really nice and easy to understand explanation ...seems totally plausible!
The spoken word is your master, the unspoken word your slave.
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