Saturday, December 22, 2007

Bradley turn date fulfilled

What a wonderful rally by Dow last night, fulfilling Bradley's turn date :P Dow was up 205 pts (1.55%), Nasdaq up 1.94% and SP500 up 1.67%.

Just a reminder that on Monday, the new bid size system will come in place. I'm still wondering what kind of impact it will do to traders here. Ccloh from cna forum had analysed it very nicely, so I'd like to share it here:


advantages
-------------
1. for less than $3 stocks, the bid size is as usual but good thing is now you can queue 10-bid lower or higher to buy or sell. example dumpling close 1.59, you can queue 1.50 to buy or queue 1.69 to sell on monday before open. isnt that good.

2. for more than $3 stocks, good news for investors as you dont need to wait behind mountain queue to buy a certain stock. example capitaland you want to buy at $6 but the mountain queue is so long that it is impossible to hit you. as such buying at 6.00/6.01 or even 6.02 makes slight different to you only as compared to now if cant get 6.00, you have to buy at 6.05.

3. for those traders still into index stocks that is more than $3, probably the new bid system can allow you to cut loss at a less loss if things turn not your way. example capitaland buy 6.30 and with the old system, 1 bid down = 6.25 and you already loss 0.05. under new system, perhaps your risk is down 3c to cut ie from 6.30 -> 6.27 then you cut loss. in a way, you save that 2c on loss. give you more time to react also.

4. as most of the index stocks are more than $3 and some at more than $10, a sudden gap up or gap down might not be that easily achieved. example DBS under old system can gap up/gap down 0.60 but the new system if no force key gap up/gap down max 0.20. that can mean a very much different to the index.

disadvantages
-----------------
1. for more than $10 stocks, the queue system is stupid. example SGX today closed $13.40. under the old system, you can queue up to $14.00 to sell or $12.80 to buy but with the new system, w/o using force key, the most you can queue up to $13.60 to sell and $13.20 to buy.

2. under the old system, for retail playing the more than $10 stocks, you need 2 bid to hit and run but under the new system, you need to queue up all the 10-bid in order to hit and run, psychologically it is a long wait.

3. under the old system for retail playing in the more than $5 but less than the $10 stock, you need 2 bid to hit and run but under the new system, you need to queue up to 6-bid to get break even.

4. the psychological barrier of from $2.99 -> $3.02, $4.98 -> $5.05, $9.95 -> $10.10 is no longer valid. under the old system, it is these barriers that attract alot of players as you can get that additional profit by just doing a 2-bid hit and run. under the new system, all these benefits are no more.



Well, I agree with him. Let's wait and see what happens on Monday. Monday's trading will be from 9 am to 1230pm only, so no afternoon session. On Boxing day (26th), HKSE is closed but STI will be open. I think it'll be a ghost town on that day.

Have a Merry Christmas!

4 comments :

linda said...

Hi have not visited your site for some time as quite sian with mkt. Thank you for explanation on the new bid size thingy, still grasping along the way. Also have missed out on Swiber, didnt buy when low. Will be more diligent and read more. Have a Merry Christmas and a Prosperous 2008. Huat on Monday also. Rgds Linda

musicwhiz said...

Hi la papillion

Thanks for posting ccloh's explanation; I am curious too to see what effect the new bid system will have, though I suspect it would improve liquidity but still will not enhance retail investors' returns if they do not invest correctly.

Don't mind me saying, but I think the bid changes will have a lot of effects for punters and speculators, and almost zero effect for investors.

Just my views.

Regards, Musicwhiz

la papillion said...

Hi Linda,

Hihi, think i've not seen your name for some time :P Don't be sian, just read up more if your portfolio isn't doing good :)

Market is always there. Cheers!

la papillion said...

Hi MW,

I agree with you fully...the new system shouldn't have much impact for investors but have tremendous effect on short term traders. ESPECIALLY for warrants...basically the new system reduced the bid spread, making it more liquid. I'm interested to see how it can make the ETF more liquid too, because presently it's being handicapped by the big spread.

Let's see how pple react to it tmr :)