guys for vwap i chose, low urgeny and even volume for imp./ SF, i chose, high urgency, even volume, lower percentage of the daily voulme i dont know if the two of above will lead me into the correct answers…can someone tell me if it would? (if the company is right, atleast i will get soem marks)… for the first two part of this questions, I chose market order for the first one and prinicipal trade for the second one… can someone please tell me how much of this is right?
u r right bsc2010
hey really? but for vwap somebody here said that we shoudk prefer the oen which had more volumem towards the end of the day while i chose the one with equal volume…so which one is correct? also was there any consensus around whether it was eletronic crossing networks or pricnipal trade?
hey thats good to know!!!
and btw how about vwap…is even volume better or end of day volume ?
bsc2010 Wrote: ------------------------------------------------------- > and btw how about vwap…is even volume better or > end of day volume > i thought even volume, but others have disagreed.
I dont understand why even volume or end of day volume would matter for vwap trading, its based on volume of trading it should not matter.
This is an example from an outfit called alphatrends: Low early volume is easily manipulated… Here is a simple example of how an institutional trader might manually execute an order for the purchase of 1 million shares. Let’s say the stock closed the previous day at $40/share. The morning the broker receives the buy order he may offer 5 or 10,000 shares at 39.90 or lower while simultaneously bidding for shares at a lower price. The first trick this broker may use is to show the full size of the offer while only showing 100 shares bid with a larger number of shares “in reserve” meaning that he may be really bidding for 5000 (or any other number they choose) shares. By showing a larger number of shares for sale and a small amount of demand in the pre-market, the broker may induce weaker holders to sell their shares in fear that there could be a real seller looking to get a head start on their selling that day. Late Day volume surges mean market orders: As the day winds down the market maker may become more aggressive in his purchases because he wants to complete the order and he realizes that, because of the earlier favorable prices he was able to attain, he will likely be able to complete the order significantly below the VWAP for the day. This hypothetical scenario is played out everyday with many variations by various institutions in countless securities. Conclusions: An increasing level of institutional business is executed with the assistance of complex algorithms and a large percentage of algorithmic orders transacted for customers are based on VWAP. Instead of relying solely on talented traders, brokerage firms create execution algorithms in an attempt to attain favorable pricing for their customers.
anyone know the impact of the High or Low bid/ask spread? which one is prefer the Vwap?
bigdog, sorry if i sound stupid…but r u saying vwap is ok for high volume later in the day or is veen volume better for vwap?
i cant remeber this questions… are all of u from asia coz i cant remeber whether such a question was on my paper in europe
i do now… i screwed it up\
VWAP is better with even volume because it implies more of a stable pricing pattern throughout the day. You also want tighter bid-ask spreads…
That was my interpretation as well…this strategy looks to trade along with market movements and is better suited for securities that trade throughout the day.
what about low volume vs high volume which is better? i assumed VWAP is better for high volume.
VWAP is better for low volume, passive trading. Implementation shortfall requires higher volume as it accounts for the opportunity cost of not trading by seeking to execute trades earlier in the day and in larger lots.
VWAP is better when your trade is small % of daily volume
i think the time of day is secondary to the other factors that were in the problem, namely: high volume %, high urgency and high cost of trade. when you knocked those out, it think you were left w/ low cost, low volume, low urgency, but later in day, which I think was the best option considering all factors. (if i remember right?)