Open question: If, for one stock, you could predict tomorrow's closing price today (with 80% accuracy within 2% of the actual price), how would you trade that stock?
Show HN: Stock Trading with Insomnia REST Client and Alpaca API
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Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API
#12Open question: If, for one stock, you could predict tomorrow's closing price today (with 80% accuracy within 2% of the actual price), how would you trade that stock?
Buy call / puts (depending on the current price) near the target price, with very close expiry dates. This would maximize your convexity.
Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API
#13Open question: If, for one stock, you could predict tomorrow's closing price today (with 80% accuracy within 2% of the actual price), how would you trade that stock?
Try an iron condor - you’ll profit if the price of the underlying asset stays between two points
Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API
#14Earlier quoted context omitted.
Likely the same as similar services like RobinHood. A quick Google suggests they make most of their money on interest from cash sitting around in user's accounts that has not been invested yet.
And by selling info about customer orders to front runners. IIUC, these are high frequency traders who may place similar orders milliseconds in advance of yours then profit from the fact that you have to pay a bit more to fill your order. Full disclosure, I continue to use Robinhood despite this.
This is highly illegal and taken very seriously. Is this speculation on your part or do you know this for a fact (in which case, you should report it).
Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API
#15Earlier quoted context omitted.
And selling order flow
What is order flow?
User data on what stocks they buy and sell
Except between the time the user clicks buy and when it the buy actually happens. Basically hedge funds are able to receive and parse this data, and change their orders to an advantage before the users order hits the actual exchange
Its analogous to a MITM attack
Despite my wording its not necessarily bad, but I think users should have a better understanding of it.
Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API
#16Open question: If, for one stock, you could predict tomorrow's closing price today (with 80% accuracy within 2% of the actual price), how would you trade that stock?
How far will it move if it doesn't land within the "80% accuracy"?
Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API
#17How is the access to historical data with these services?
Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API
#18Open question: If, for one stock, you could predict tomorrow's closing price today (with 80% accuracy within 2% of the actual price), how would you trade that stock?
It's easy to predict tomorrow's closing price with that accuracy: it will be the same as today's closing price.
For a large majority of S&P 500 stocks this prediction will be within 2% of the actual price very often (more than 80% of the days). In aggregate, the hit rate is over 80% as well.
Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API
#19Re: Show HN: Stock Trading with Insomnia REST Client and Alpaca API
#20Earlier quoted context omitted.
And selling order flow
What is order flow?
Seeing/selling order flow is a term of art in finance. Seeing order flow refers to the ability to trade against customer orders. Selling order flow is getting paid by someone else for the ability to trade against customer orders.
Imagine that a stock is bid at $100.00 and offered at $100.01. Assume that market makers estimate the fair price to be $100.005 unconditionally.
A customer sends a marketable buy limit order at $100.01.
If this hits the exchange then the person who's offering at $100.01 will make $0.005.
If the order flow gets sold (i.e. someone gets to see the flow before it hits the exchange) then the internalizer can fill it at $100.01 and make the $0.005 themselves instead of letting someone else on the exchange do it. It has nothing to do with front running or even information.
This is really valuable because you're not competing for speed with other market participants and you expect the customer flow to be uninformed so the trade is less likely to move against you before you trade out.
This is a problem for market structure because it discourages people from quoting on the exchange.