SNSN schreef op 15 januari 2015 14:11:
For those looking to pick up “fast returns” out of “event/liquidity-risks” - there is a trivial (but somewhat risky) strategy. Certainly this is NOT an advise to use it! It's just info.
If shortly, a standard “GTC-LMT buy order” may be placed approx. ~0.5-2% (exact value depends on st-average trading volume p/min - specifies current liquidity (!), mid/long-term “key/turning points”, and your own “risk-aversion“) under the current “lowest range” for profitable spec shares. Of course, a standard “stop” may also be placed (though usually not necessary, as mms should take care of liquidity anyway) much lower - depends on st-average trading volume (liquidity measures for a particular stock at a particular time!), current st-volatility, and your own risk-appetite....
It works not often, but on both up/down events/liquidity spikes (with "sell"/"buy" orders correspondingly), as mms can‘t always correctly “program” and keep enough liquidity in comp trading on any “unexpected“ +/- info (usually liquidity is programmed on average traded volume with a margin accounting for volume-volatility - something around ~1-sigma - just a subject of policy).
Such type of “event-strategy” (return on liquidity risk) is actually a “liquidity help” for market-makers (mms). It is more or less reliable for stable funds with (almost) “zero” default risk (!) For volatile funds - it would be (with some adjustments) more close to “volatility trading”, which is even much more risky, as you know....