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Equities Execution in Focus GlobalTradingMarch 2, 2023 With Katherine Chairez, Head of Execution Strategy, Harris Associates
Briefly outline your career background and current role/responsibilities at Harris Associates.
I spent the first 11 years of my career on the sell side in financial engineering and execution consulting roles at Goldman Sachs and then Citadel Securities in New York. From there, I moved to the buy side with UBS Asset Management in Chicago, where over four years I focused on trading strategy and analytics and eventually headed the Americas equity trading desk.
I currently serve as the head of execution strategy at Harris Associates, a role I’ve held for the past four years. In this role, I am responsible for best execution initiatives across global equities with a focus on algorithmic trading, automation and strategy selection.
How has the execution landscape evolved over the course of your career?
When I entered the electronic trading space in 2005, dark pools had not yet reached prominence in the U.S. During that time, algorithm utilization, when it occurred, was often confined to primitive volume-weighted average price, time-weighted average price and percentage of volume strategies.
With the emergence of dark pools and fragmentation, so too emerged a second generation of liquidity seeking algorithms. Child order placement was no longer just about size, time and price, but also venue.
Advancements in technology gave way to further innovation—new order types, new venue types, etc.—and speed became a differentiator.
Along the way, as the landscape became more complex, electronic solutions became even more essential.
How has Harris’ execution strategy adapted to such changes in the execution landscape?
The ability to navigate a constantly changing landscape is critical to an effective execution strategy. Necessarily, the way Harris executes today looks very different compared to even just five years ago.
For example, with more volume shifting toward the close in the U.S., we have pivoted to incorporate imbalance feeds, utilize better auction estimates and leverage D-Quote flexibility.
In Europe, where we have seen periodic auctions, LIS venues, SIs and MTFs exhibit statistically different markouts, we have focused on curating an appropriate liquidity experience for various segments of our flow.
Overall, as we have worked with our brokers to develop custom algorithmic strategies that align with our various order segments, we have shifted to a higher proportion of low touch trading.
What allows Harris to manage execution so well?
We run a very efficient team at Harris. From trading to analytics to execution strategy, and including our support teams and technology stack throughout, we are aligned on our trading philosophy and approach across more than 30 markets.
Because we run lean, we are also very nimble. We are able to adapt quickly to improvement opportunities that crop up over time. Oftentimes, we are the first client to approach a broker to request a given feature.
We maintain frequent interactions with our brokers around the globe so that we can supplement our observations at Harris with what they see more broadly. These collective findings often motivate new initiatives and collaborations, such as new algorithm features or strategies, that we pursue on our path of continuous improvement.
Finally, we have the full support and trust of our portfolio managers, which allows us to pursue the initiatives that we think will be most meaningful for our clients.
How have objectives around execution strategy changed?
While the landscape has changed considerably over time, the name of the game has remained the same: liquidity. The challenge, though, is not about separating good liquidity from bad, as some believe. The challenge is in understanding one’s own liquidity needs, discerning the goals of would-be counterparties, and ascertaining how and when those interests should intersect. In my opinion, firms that can do these three things well are serving their clients well.
How do you measure the effectiveness of your execution strategy?
We utilize structured A/B experiments to observe the effectiveness of a given test strategy versus the status quo. Harris uses impact-adjusted arrival price as our primary benchmark for measuring trading costs. We also consider other factors and data points, such as volume-weighted average price, participation-weighted price, reversion and liquidity capture, for additional insights on execution quality.
How do you see execution strategy needs changing in the future?
I think we’ll continue to see a trend toward more consistency and transparency around best execution oversight, which hopefully will arm the buy side with more information and control.
We’re definitely staying tuned to the market structure developments in the U.S. While there remains uncertainty about the current proposals, there is potential for significant impact to some key players in the space. We must try to anticipate how that might impact our clients.
Longer term, with the execution strategy function becoming increasingly technical, I think we’ll continue to notice a natural shift of early career technical talent across industries. It will be interesting to see how temporary and/or permanent work-from-home and hybrid protocols in finance affect the early career talent pipeline in the space.
What Does AMC Stock Have to Do With the Collapse of Credit Suisse?Not so long ago, Credit Suisse predicted that AMC shares would reach less than a dollar per share. However, the tables have turned. Here's what you need to know. Mar 23, 2023 8:48 AM EDT Swiss bank Credit Suisse collapsed over the weekend and will now be acquired at a discount by rival UBS.Credit Suisse analysts had rated AMC shares as a "sell" and expected the stock to reach below $1.Credit Suisse's chairman blames social media and retail investors for the swift downfall of the bank. Figure 1: What Does AMC Stock Have to Do With the Collapse of Credit Suisse?
What Happened to Credit Suisse?Over the weekend, Switzerland-based financial giant Credit Suisse (CS) - Get Free Report collapsed. Shares of the bank are now worth less than $1.
But Credit Suisse's problems were no new development. The bank had struggled with financial losses, mismanagement, scandals, and liquidity concerns for years.
In 2021, Credit Suisse was one of the banks involved in the Archegos Capital Management scandal, which caused it $4.7 billion in losses.
Credit Suisse was also the lead investor in the failed Greensill Capital two years ago and was involved in an espionage scandal five years ago, along with other troubles.
Now rival Swiss bank UBS (UBS) - Get Free Report is set to acquire Credit Suisse at a hefty discount.
What Credit Suisse's Chairman SaidThis week, Credit Suisse chairman Axel Lehmann was asked about the reasons behind the bank's collapse. His answer was surprising.
According to Lehmann, not only had the bank been overcome by risk, but it was also affected by an outdated business model.
He pointed out that the bank's customers had been loyal for quite a long time. However, since last autumn, a social media storm has targeted Credit Suisse, shaking the confidence of its investors.
Fox Business journalist Charles Payne tweeted that Lehmann deserves to be nominated for "Clown A$$ of the Year" for that statement:
When Credit Suisse Poked the Apes Last October, Credit Suisse joined the AMC Entertainment (AMC) - Get Free Report bears. The bank's analysts rated the theater chain as a "sell" and forecast a price target of 95 cents.
Credit Suisse's main problem with AMC was the company's lack of profitability. According to Credit Suisse, even if attendance levels were to return to pre-pandemic levels, AMC would still need to see healthy returns on its balance sheet.
Apparently, the Swiss bank wasn't counting on this happening.
Credit Suisse's position on AMC has been interpreted by many individual investors as a case of the pot calling the kettle black. At the time, Credit Suisse itself was worth less than $4 per share and was already showing signs of approaching penny-stock levels.
With Credit Suisse's business already in turmoil, many in the market started to question its survival.
Investors began to turn their attention toward the rapid decline of Credit Suisse and, of course, its potential spillover effects.
The bank reported steadily decreasing revenues, losses from its Russian business, and also litigation costs. This forced the bank to drastically reduce its headcount at the end of last year.
Today Credit Suisse shares are worth less than $1, while AMC's stock trades for nearly $5 per share.
The Bottom LineThe collapse of Credit Suisse didn't happen overnight, nor did it have only one cause. There was an accumulation of factors that had already been weighing on the bank's outdated business model — along with many bad strategic decisions over the past years.
Perhaps the final blow came when retail investors on social media platforms scrutinized Credit Suisse's reputation. This possibly impacted the abrupt collapse of its share price.
AMC and GameStop (GME) - Get Free Report are the most-talked-about stocks on social media sites like Reddit. Socially mobilized retail investors — also known as the "Apes" — believe that banks and institutional investors are the enemies of individual investors due to their unequal trading structures.
So it's not hard to understand why many retail investors root against financial institutions like Credit Suisse.
Even last October, when the social media storm hit Credit Suisse shares hard, company executives issued a memo telling employees not to confuse stock performance with the bank's capital strength and liquidity.
Since 2021, we've probably seen the most speculative stock market in history. The negative exposure of Credit Suisse on social media was just the icing on the cake.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)
I am retired Navy So I find this very interesting and a Lesson Learned
Reinforce the Navy Reserve Sailors man the rails as the USS Ronald Reagan departs for Yokosuka, Japan, from Naval Station North Island in San Diego, Calif., August 31, 2015. (Mike Blake/Reuters)none
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“It is not that life ashore is distasteful to me. But life at sea is better.” —Sir Francis Drake
Here’s what we know: The Navy is as valuable in peacetime as it is in wartime. Were it not for our forces afloat, the seas would be significantly more at risk from the predations of piracy, as well as endangered by rogue states. The stolid presence of American warships is the guarantor of international sea lanes by which the world’s poorest are supplied the means of economic advancement and by which the world’s wealthiest nations develop their life-bettering technologies. From the South China Sea to the Suez and Panama Canals, vessels bearing the designation “USS” protect the goods necessary for energy, nourishment, and shelter.
Here’s another thing we know, having been reported almost everywhere: The market has rarely been tougher for military recruiting. When the Navy reports that it cannot find enough new sailors to replenish its annual losses, it is an international trade concern just as it is an American defense concern. An arrogant assertion? No, it is the unvarnished truth. There exists no force on earth that can secure the sea lanes if our Navy is allowed to atrophy — and the atrophy would be self-inflicted by rigid bureaucracy.
To take Drake’s remark a step further, life at sea should be the keel upon which the modern Navy’s retention lies. A sailor on land, in the shipyard, or at a mustering depot is a body that can be better used aboard the nation’s seagoing vessels. Be he mopping, working an underway replenishment, or filling one of the multitudinous roles required to maintain the vessel’s mission readiness, it should be a priority to see the young seaman detached from anything other than deployments and preparing ships to deploy. But what to do when fresh sailors are getting hard to come by?
Last year, to make up for its recruitment gap, the Navy dipped into its delayed-entrant savings account. Consequently, there’s no longer a fund of pending recruits to draw from. If young Americans are both less inclined to serve as well as less qualified — just 23 percent are qualified today, and not even 10 percentare inclined to join up in the first place — then we must look elsewhere for those who would take up a seabag and cross the ship’s brow.
If not new bodies, then what about Certified Pre-Owned? We should recruit the already recruited, some 48,000 of them, the young veteran sailors in our schools and workplaces — and it would be easier than one might think. As any salesman will tell you, a repeat sale is easier than a cold call.
Right now, when a sailor leaves the service, he’s gone. He’s made the excruciating decision to leave his shipmates, attend separation classes, and finally walk himself outside the gates of the naval base with nothing but a DD-214, a few tattoos he didn’t have at 18, and, for some, a void of purpose. For many, this void is an opportunity, but it is nonetheless novel and terrifying. There’s no easy way back aboard, though he’s more qualified than anyone driving past him.
Separating requires hardening one’s heart against the appeals of senior leadership to stay, so it’s unlikely he’s ready to return. But a year later? When he’s meeting up at a bar in Greater Milwaukee with other guys he served with, and they get to talking about their time, isn’t there a part of him that wishes, as they do, that he could go back for just a while longer? Almost always, yes.
But to return to the service often requires as much or more work than his original enlistment, and he doesn’t want to go through a year of paperwork just to get orders to a ship in the yards, where he’ll be for four years — he wants to sail. He wants to fly to Oahu and step aboard a ship the day it points its bow westward under steam.
Here is an opportunity: We should seek out experienced separated sailors and offer them temporary positions back aboard soon-to-be-deployed vessels the sailing of which depends on men with their qualifications. Additionally, we should reformat the reserves to make continued deployments possible without unnecessary mustering and rigamarole.
First, the hard numbers. When a sailor enlists, he signs up for eight years in the Individual Ready Reserve (IRR) as an addendum to his active-duty contract (i.e., the timer for the inactive obligation starts counting down the second he’s sworn into the service). Additionally, a recruit often receives a “secret” security clearance that lasts for ten years; without the clearance, a sailor is essentially unable to serve on a ship. For simplicity’s sake, let’s assume neither of these numbers is adjustable. Whether a sailor has a four-year enlistment or extends it to six or eight, he has the inactive obligation and the benefit of a decade under a security clearance.
It would benefit the Navy to keep sailors on retainer even after an active enlistment ends. If I had my druthers, the process would be as simple as the engineering officer getting the captain’s approval (a captain who needs to meet certain minimums for viability to deploy), then picking up his phone and asking his former sailors if they’d be willing to come back for a cruise. If a former sailor said yes, the JAG — a Navy lawyer — would send over a contract that reenlisted the refrigeration mechanic for nine months, with the understanding that the deployment could be extended. The sailor would report to an existing Military Entrance Processing Station (MEPS) and go through the normal medical lookover. He’d then be handed a ticket and jet off to meet the ship. After a successful deployment, the sailor would receive a completion bonus and return to whatever else he had going on in his life. (More practically, an anodyne call from the chief engineer urging a former sailor to report to MEPS to hear about an opportunity seems like a more OPSEC-friendly version, though lacking in dramatic satisfaction.)
Simple as that.
The former sailor already knows ship life, the Navy’s expectations, and how to manage a watch rotation and maintenance. It takes two years to get a recruit past the NUB (non-useful body) stage (boot camp then schooling then on-board qualifications); it’d take two days to get a former sailor back into the routine. When old salts rode along on Tiger cruises — an opportunity for civilians to ride a ship home from Hawaii to homeport with an active sailor they know — it was easy to pick them out because they knew how to move around the ship and speak the language. The only difference was that the salts were grayer, happier versions of active-duty sailors.
But I’m not talking about bringing back retirees for a glory cruise. No, we have tens of thousands of sailors leaving the service every year who are of sound body and mind, most of them still in their twenties, who don’t want to do the Navy full-time or put up with the imposition of Selected Reserve (SELRES) — the type of reserves that have monthly drilling musters and other superfluous obligations.
Most return sailors would be junior enlisted — the labor force of the ship. We could have used an extra couple of watch standers on every deployment I was a part of, but I never did see a reservist slotted in to that or any other position needed before deployments. Having to switch to a twelve- from an eight-hour shift because someone was busted for drugs or got pregnant weeks before deployment was . . . frustrating. Frustrating because we knew no one was coming to fill that gap, so we should all get used to less sleep. Please know, however, that officers in the reserves inform me that a recent policy shift looks to improve this relationship. Sailors in high-demand rates (jobs) — such as a fire controlman with an AEGIS specialty — retain that title when joining the active reserves. Also, there’s now a portal where active reservists can apply for billets on ships in need of certain qualifications.
Consider the secondary advantages of more fluid hiring practices. The Navy would clean out some of the ranks of reluctant lifers who are leery of returning to the civilian world. If sailors knew the door wasn’t slamming behind them and so were less afraid of going forth, I have to think that some of the nastier culture issues in the service might dissipate with the pressure relief of a door left ajar. People who feel trapped are rarely generous or fun to work with — we all served with an E-6 like this at some point.
Then the financial incentives. On one hand, the Navy would be paying for the part of a ship’s cycle that gets the best return — the deployment phase — instead of offering huge reenlistment bonuses to sailors leaving for shore duty or for a ship welded to a pier. For many sailor-turned-civilian-turned-sailors who are hard-up in their civilian lives, the opportunity to stash away cash would be welcome and, with the move away from the pension system, would allow former sailors to avail themselves of the Thrift Saving Plan (the pension’s replacement) for a protracted period to ensure a more secure retirement.
Here’s what I know: The Navy needs sailors, and it doesn’t look like they’ll be streaming into recruiting offices. I offer my suggestion as a way for the most vital branch of the military to quickly rectify a deficit, improve the mission readiness of the fleet, and allow captains to efficiently man their ships without having to beg a detailer for the impossible. We have built into an enlisted man’s contract the structure for eight to ten years of at least sporadic assistance. Rather than allow qualified individuals to disappear, we should call them back for the things that matter most. With 90,000 sailors between IRR and SELRES, we have the bodies. Let’s make it as seamless as possible to get them where we need them to be.
AMC’s APE-conversion settlement could lead to ‘potentially massive’ $16 billion equity raise, says analyst
The stock conversion is part of AMC’s ongoing battle to eliminate debt
AMC’s APE-conversion settlement paves the way for a huge equity raise that could bring in as much as $16 billion.(MarketWatch photo illustration/Everett Collection)
AMC’s APE-conversion settlement paves the way for a huge equity raise that could bring in as much as $16 billion, according to B. Riley Securities analyst Eric Wold.
Wold said that the settlement clears the decks for a “potentially massive” equity raise. “Should the conversion of APE units to AMC common shares be permitted to proceed — along with the increase in authorized common shares and 1-for-10 reverse stock split — we continue to see a positive path for the company to raise significant amounts of capital,” he wrote in a note released Tuesday.
“At the recent trading price of AMC shares (accounting for the after-market performance on Monday), this would indicate the potential for as much as $16 [billion] in equity to be raised by the company,” Wold added.
AMC’s stock plummeted 23.7% before market open Tuesday, while the APEs rose 16.9%. AMC shares ended Monday’s session up 2%, or 79.9% off its 52 week high, FactSet data show. The APEs ended Monday’s session up 0.7%.
The movie-theater company’s total aggregate principal debt was $4.9 billion at the end of 2022, down from $5.2 billion at the end of 2021.
Last month, AMC shareholders voted in support of the company’s proposal to convert AMC Preferred Equity units into shares of common stock in what the company’s CEO Adam Aron described as a “landslide victory.”
“Although we had felt it would be difficult for the judge to rule against the validity of this vote given the overwhelming support of stockholders, this now seems to be a moot point with the binding settlement announcement,” Wold wrote. “While we maintain our Neutral rating and $4.50 [price target] until final approval is granted and the conversion occurs, we still expect the prices of APEs and AMC shares to converge.”
AMC describes itself as the largest movie-theater company in the world, with approximately 950 theaters and 10,500 screens across the globe.
Over the past two years, AMC has been on a roller-coaster ride that took it from beleaguered pandemic victim to meme-stock phenomenon. AMC’s stock has risen 25.6% in 2023, outpacing the S&P 500’s SPX, -0.25% 7.4% gain, while the APEs have risen 5%.
Of eight analysts surveyed by FactSet, three have a hold rating and five have a sell rating for AMC.
Unusual Put Option Trade in AMC Entertainment Holdings (AMC) Worth $940.00K
On April 6, 2023 at 14:53:32 ET an unusually large $940.00K block of Put contracts in AMC Entertainment Holdings (AMC) was sold, with a strike price of $13.00 / share, expiring in 43 days (on May 19, 2023). Fintel tracks all large options trades, and the premium spent on this trade was 5.49 sigmas above the mean, placing it in the 100.00 percentile of all recent large trades made in AMC options.
This trade was first picked up on Fintel's real time Unusual Option Trades tool, where unusual option trades are highlighted.
Analyst Price Forecast Suggests 43.11% Downside
As of April 6, 2023, the average one-year price target for AMC Entertainment Holdings is $2.30. The forecasts range from a low of $0.50 to a high of $4.72. The average price target represents a decrease of 43.11% from its latest reported closing price of $4.05.
The projected annual revenue for AMC Entertainment Holdings is $4,784MM, an increase of 22.31%. The projected annual non-GAAP EPS is -$0.38.
What is the Fund Sentiment?
There are 470 funds or institutions reporting positions in AMC Entertainment Holdings. This is a decrease of 39 owner(s) or 7.66% in the last quarter. Average portfolio weight of all funds dedicated to AMC is 0.05%, a decrease of 35.36%. Total shares owned by institutions decreased in the last three months by 3.78% to 134,110K shares. The put/call ratio of AMC is 1.52, indicating a bearish outlook.
What are Large Shareholders Doing?
VTSMX - Vanguard Total Stock Market Index Fund Investor Shares holds 16,170K shares representing 3.11% ownership of the company. In it's prior filing, the firm reported owning 15,513K shares, representing an increase of 4.06%. The firm decreased its portfolio allocation in AMC by 43.79% over the last quarter.
NAESX - Vanguard Small-Cap Index Fund Investor Shares holds 13,699K shares representing 2.64% ownership of the company. In it's prior filing, the firm reported owning 13,122K shares, representing an increase of 4.21%. The firm decreased its portfolio allocation in AMC by 43.56% over the last quarter.
VISVX - Vanguard Small-Cap Value Index Fund Investor Shares holds 9,599K shares representing 1.85% ownership of the company. In it's prior filing, the firm reported owning 8,957K shares, representing an increase of 6.69%. The firm decreased its portfolio allocation in AMC by 45.03% over the last quarter.
VEXMX - Vanguard Extended Market Index Fund Investor Shares holds 7,112K shares representing 1.37% ownership of the company. In it's prior filing, the firm reported owning 6,947K shares, representing an increase of 2.31%. The firm decreased its portfolio allocation in AMC by 42.39% over the last quarter.
Geode Capital Management holds 6,891K shares representing 1.33% ownership of the company. In it's prior filing, the firm reported owning 6,843K shares, representing an increase of 0.70%. The firm decreased its portfolio allocation in AMC by 45.55% over the last quarter.
AMC Entertainment Holdings Background Information (This description is provided by the company.)
AMC is the largest movie exhibition company in the United States, the largest in Europe and the largest throughout the world with approximately 1,000 theatres and 11,000 screens across the globe. AMC has propelled innovation in the exhibition industry by: deploying its Signature power-recliner seats; delivering enhanced food and beverage choices; generating greater guest engagement through its loyalty and subscription programs, web site and mobile apps; offering premium large format experiences and playing a wide variety of content including the latest Hollywood releases and independent programming.
A 24-year-old stock trader who made over $8 million in 2 years shares the 4 indicators he uses as his guides to buy and sell
May 23,2023
Jack Kellogg, stock traderJack Kellogg One of Jack Kellogg's main indicators is the volume-weighted average price (VWAP).
This shows the average price paid for shares and helps him gauge sentiment.
He only uses indicators as a t=rough guide but never trades solely on them, he noted.
Jack Kellogg began trading stocks right out of high school in 2017.
Five years into his craft, he has already been exposed to various types of market conditions, including the stock market crash of 2020, the raging bull rallies of 2021, and the bear market of 2022. One thing he has learned through it all is to keep things simple and remain flexible.
"There's this acronym: KISS, keep it simple stupid. I don't think people need super fancy indicators to make money trading. I'm just using basic trend lines, support, resistance, volume, and those are all my indicators," Kellogg said. "I think if you overcomplicate the indicators, it will actually throw off your trading because then you're trading more on the indicators than the actual price action."
This attitude has allowed him to become a versatile trader who takes both long and short positions when appropriate, which helped him to continue trading throughout the bear market of 2022. His tax returns, viewed by Insider, showed that he reported over $8 million in gains from day trading in 2020 and 2021. His returns gained momentum in 2020 when he had a total income of $1.6 million. In 2021, that amount grew to a total income of $6.5 million.
So his next moves included switching off real trading and testing his skills through paper trading. Then, he signed up for an online course his parents helped pay for. The program, which was created by Timothy Sykes, a trading teacher and former penny-stock trader known for claiming to flip his bar mitzvah cash gift into over $1 million in gains, helped him develop the skills and patience he then used to craft his skill.
By the time the stock market began to rally hard in 2020, he was ready to ride the upwards wave. In 2022, when the market slowed, he continued to reel in profits by betting on popular stocks like Bed Bath and Beyond (BBBY) and AMC (AMC), the latter of which banked him $60,000, according to a screenshot of his E-Trade brokerage account. He also traded a few small-cap stocks and saw large wins on single trades like Intelligent Living Application Group Inc. (ILAG) which earned him over $91,000, according to screenshots of his Guardian account.
His top 4 indicators The first indicator he uses as a sentiment guide is the volume-weighted average price (VWAP), which shows the average price paid for shares through all trading adjusted for volume. He uses it on the daily chart as a guide to determine a good buy-in price for the stock he's trading. This keeps him from being a chaser, the term popularly used for those who enter a position too late or after a stock begins to rally.
If the goal is to buy low and sell high, you don't want to pay more than what the average buyer paid, he noted. Therefore, Kellogg won't enter a position if the price is above the VWAP line. The opposite is true if he's shorting a stock: if the price is beneath the VWAP, he generally won't short the stock.
Oftentimes, he'll use this indicator to also determine when to exit his position because that point can sometimes indicate where a stock's price will begin to drop off. The same is also true in reverse: he'll sometimes use the VWAP to determine the price point where he'll cover his position. Therefore, if he shorted a stock at $9 and the VWAP is at $7.50, he'll use that price as a point to lock in profits.
For example, on January 5, he took a short position on ticker AMTD at $2.50. VWAP's center line was trending at around $2.22. So Kellogg covered his position at $2.25 and made a 10% profit.
The next indicator is linear regression, which shows the direction price is trending and when it may change its direction. They are three lines that overlay the candles. The lower and upper lines are the ranges of price movements or volatility, while the center line indicates the average between the two. Price action above the top line signals an overbought stock, and below the bottom line, an oversold stock.
"So the better a stock is respecting the lines of the channel that's created, the more predictable I think the stock's going to be," Kellogg said. This gives him a better sense that the stock's price action will trend according to his thesis.
The next indicator is volume which shows the number of shares being traded at any moment in time. Kellogg mainly uses volume as a potential indicator that a stock may reverse.
"Seeing big volume go through, I know that potentially a lot of people are on the wrong side. So if a big volume spike goes through near the high of the day, it's possible that a lot of people are buying the stock and a lot of people are chasing," Kellogg said.
Finally, he keeps his eye on the support and resistance lines, the former being where the price tends to hold and the latter where it tends to sell off. The levels change throughout the day. Kellogg tries to find the key levels by looking for a parallel increase in volume in those areas. He also pays attention to how many times and for how long a price level holds to determine how strong that point is. While it's not an exact science, general areas where the price hoovers for 30 minutes to an hour are the strongest, he said.
"Eventually, you'll see a bouncing ball-type price action if the stock is going to go lower," Kellogg said. "So you see it bounce from $7 to $8, then bounce again from $7.30 to $7.50, and then bounce from $7.40 to $7.10, then bounce from $7.20 and eventually cracks the support below $7. And then the question is, is it going to create a resistance level at $7 and continue to head lower?"
At the end of the day, price action is king, Kellogg noted. Even if you have a thesis about why a stock's price can move in a certain direction, if the price is moving differently, you need to cut losses.
"I don't ever just base my entire decision off an indicator. So if an indicator isn't agreeing with the trade thesis, then I simply will cut my losses," Kellogg said. "So I've never ever blamed any of my losses ever on an indicator because I don't let it get to that point. If the price action is continuing down, then I will cut my losses or if the price action is continuing up, then I'll cover my short positioning."
Everyone has access and can view the same data — it's really about what you do with that data, he said. Where most traders struggle is with the psychology of trading. You can have the best strategy and indicators, but if you don't have the discipline to stick to it, then you will constantly find yourself in a bad situation. Most people don't put in enough effort to master their emotions, he said.
Hedge funds are using ChatGPT to do all their mundane grunt work usually relegated to junior staffers
Fortune The latest artificial-intelligence hype is powering a massive surge in the stock market on bets that a new era of innovation is nigh.
Yet for money managers who weaponize computing advances for an investing edge, the era of ChatGPT holds a less lofty promise for now: Automating the grunt work.
So-called generative AI is already helping to speed up mundane tasks known to crush the spirit of junior Wall Street employees, hedge funds say — from reviewing reams of market research to writing basic code and summarizing fund performance.
Chatbots could eventually help generate material efficiency gains and provide more rewarding work for their human overlords, possibly at the cost of jobs. But it’s early days yet.
At systematic hedge fund Campbell & Co., its quants have spent months experimenting with using the tech behind ChatGPT to summarize internal research and write boilerplate code. Yet generative AI tools are proving no game-changer for their day-to-day investing methods, just yet.
“They are very strong for code completion, editing, finding errors and fixing bugs,” said Kevin Cole, chief executive officer at Campbell. “Our model would keep humans in the loop — an assistant to the human helping to make their job more efficient.”
AI on Wall Street is a broad church that includes everything from machine-learning algorithms used to compute credit risks to natural language processing tools that scan the news for trading. Generative AI, the latest buzzword exemplified by OpenAI’s chatbot, can follow instructions and create new text, images or other content after being trained on massive amounts of inputs. The idea is that if the machine reads enough finance, it could plausibly price an option, build a portfolio or parse a corporate news headline.
As hedge funds experiment with the latest iterations of these tools, the ultimate goal is improving investing performance. For now, boosting productivity — accelerating coding, research and client communications — is the most obvious benefit. It’s why the likes of Citadel’s Ken Griffin said in March the firm is negotiating an enterprise-wide license to use ChatGPT, betting that it will automate an “enormous amount of work.”
At Man Group, one of the world’s largest hedge funds, Rob Furdak says ChatGPT can speed up the preliminary parts of research by reviewing a stack of academic papers on a particular topic and detecting basic patterns in data sets.
“A big part of the research process is cleaning the data, mapping it and then doing a preliminary analysis,” said the chief investment officer for responsible investment. “ChatGPT could say ‘that’s an interesting hypothesis, but here are other hypotheses you may want to investigate as well.’”
The firm is also looking into automating the grunt work of investor relations, he said, since ChatGPT can easily explain performance by synthesizing market data and fund returns.
Wall Street, of course, is already famously filled with computer wizards that populate algo trading desks, quant hedge funds and high-frequency market makers, and to them, ChatGPT’s capabilities might not seem that new. The current frenzy has arguably been fueled as much by the sudden widespread availability of the tool as any advances in what generative AI actually does.
Still, early studies suggest the chatbot does represent some steps forward. For instance, Fed researchers found it beats existing models such as Google’s BERT in classifying sentences in the central bank’s statements as dovish or hawkish.
A paper from the University of Chicago showed ChatGPT can distill bloated corporate disclosures into their essence in a way that explains the subsequent stock reaction. Academics have also suggested it can come up with research ideas, design studies and possibly even decide what to invest in.
Peter Cotton, chief data scientist at Intech Investment Management, is among recent converts after testing the robot himself. He posted on Github a conversation he had with ChatGPT, where he used it to write code for extracting data and making predictions.
“My whole workflow has been dramatically changed,” he said. “I’m surprised by just how much knowledge is stored inside.”
The technology isn’t perfect, however. ChatGPT has been known to make up facts and spit out different responses to the same prompt, and is only trained on data up to late 2021. Meanwhile, in an industry where trade secrets are anxiously guarded, many are still hesitant about relying on external software.
For that reason, Campbell has also experimented with an open-source and less powerful GPT model that it can run entirely within its own systems, said CEO Cole.
“We have to be very careful about risks of IP leakage with those types of tools because with ChatGPT, you’re sending queries to OpenAI servers,” he said.
While hedge funds figure out what’s possible with generative AI, the consequences for the industry’s human workforce remain undecided for now.
Greg Bond, chief executive officer of Man Numeric, Man Group’s Boston-based unit, reckons the tech could be an opportunity for creative employees who lack technical expertise but can ask the right questions.
“If we assume research productivity is dropping more globally, you can either hire more people or you could have some digital researchers that are a force multiplier on your existing research and technology staff,” Bond said. “Ultimately what would be nice is if we could automate the innovation process itself.”
Why This Micro-Cap Company Is Targeting Naked Short Sellers
Jeremy Frommer is an American financier and entrepreneur based in New Jersey. His career includes over two decades on Wall Street, working as a hedge fund and portfolio manager, and on the sell-side of the financial industry, building and selling two financial services companies. He is CEO of Jerrick Ventures
Micro-cap company Creatd has been taking steps to protect its shareholders from abusive trading practices such as naked short selling.According to the company's CEO Jeremy Frommer, naked short selling has become a toxic lending environment among micro-cap companies.Naked short selling has also been suspected in AMC and GameStop shares. See also:Why AMC Stock Could Be A Ticking Time Bomb For Short Sellers At Current Levels
Why Creatd Is Going After Naked Short SellersCreatd (CRTD) - Get Free Report is a holding company in the communication services industry that provides opportunities for brands and creators to multiply their impact across platforms, people, and technology.
The company, headed by Jeremy Frommer, has a market cap of $22 million and was recently delisted from the Nasdaq. Creatd failed to meet the exchange's minimum bid requirements because it trades below $1 per share. Currently, the company is traded on over-the-counter (OTC) markets.
Recently, Creatd drew the market's attention after an announcement that it would engage with market surveillance firm ShareIntel to protect its shareholders from naked short-selling activities.
ShareIntel uses a SAAS (software as a service) platform that provides public companies with access to shareholder position movement and settlement data.
According to Frommer, it's necessary to take a closer look if a company and its underlying stock are being targeted by illegal practices such as naked short selling. Furthermore, the CEO promises to escalate this topic to the top level in the financial markets.
"I intend on escalating this issue to the highest levels of the financial services industry to protect the integrity of the capital markets, especially the more vulnerable entrepreneurial, growth-oriented stocks," said Creatd's CEO.
Why Is Naked Short Selling a "Death Sentence"?During RHK Capital's recent Disruptive Growth Conference, Creatd CEO Jeremy Frommer spoke about the nefarious practice of naked short selling.
He mentioned that, from United Airlines (UAL) - Get Free Report at the turn of the 21st century to GameStop (GME) - Get Free Report and AMC Entertainment (AMC) - Get Free Report more recently, the practice of naked short-selling has wiped out the reserves of many American workers.
“It has destroyed their pensions and eliminated their jobs from pilots to bag handlers to grocers, to technologists and scientists working for life-saving medication.”
Also, according to the CEO, the illegal trading practice is weakening the financial strength of the underlying companies. This has led to a toxic lending environment.
“Who pays the price? [Naked short selling] can be a death sentence for a company irrespective of the company's intrinsic value. I know that it nearly killed my company," Frommer said.
Finally, Frommer reiterated that it is almost 2023 and still no authority has addressed the issue. His criticism also said that in the last few years, what had been just an agreement between a few stock loan departments has become an "institutionalized technology-driving money-making machine."
“And it does not matter if they get fined millions or even a few billion. They are treated as line items. It’s just another cost of doing business.”
Naked Short Selling in GameStop and AMC StockGameStop and AMC investors have long urged greater transparency across the market. And with their holdings being allegedly directly harmed by practices such as naked short selling, it’s not hard to see why.
One of the indicators that raise suspicion of odd trading activities is the failure-to-deliver (FTD) data. FTD occurs when one of the parties fails to fulfill its obligations on the settlement date.
However, this metric is closely associated with naked short selling. This practice generates so-called "phantom shares" that don't exist, potentially harming the liquidity of a shorted asset and diluting its share price.
As can be seen in the chart below, throughout 2-22, GameStop's shares failed to deliver and had high peaks between May and August, surpassing the 1-million-share mark on certain trading days.
When looking at AMC's FTD data, the numbers are much higher than GameStop's. Throughout this year, failure to deliver exceeded 9 million shares in a single trading session in June, and several other times passed 1 million shares — until as recently as November. See below.
With such high FTD numbers in AMC stock, the huge community of "AMC apes" on Reddit believes that the cinema company's stock has been hurt by predatory short-selling practices, such as naked shorting.
In the middle of this year, AMC created the AMC Preferred Equity(APE) unit as a non-dilutive dividend. Their "main" purpose is to add value to AMC, but APEs can also serve as a kind of share count for the AMC's total shares.
APEs may shed light on the use of synthetic shares by AMC short sellers — as AMC CEO Adam Aron himself pointed out:
The Bottom LineNaked short selling is certainly a controversial subject. Some market participants see the practice as not harmful and believe that its prevalence has been exaggerated. Others see the practice as a confusing and harmful trading practice.
Yet none of the issues regarding naked short selling in stocks like AMC, GameStop, and micro-cap stocks have been either confirmed or clarified by authorities.
However, the U.S. Securities and Exchange Commission (SEC) has announced a proposal for one of the most significant market structure reorders in recent years. The proposal involves improving the competition between market makers and payment-per-order flow practices.
Recently, market-making companies like Citadel Securities have been the subject of a lawsuit by biotechnology company Northwest Biotherapeutics (NWBO) for allegedly illegal trading practices such as spoofing. Spoofing is a manipulative practice in which a trader issues an order but then cancels it before it is executed.
Events like the meme craze have helped bring more public interest regarding trading structure. This is a good thing, because it's pushing authorities to take a closer look at these issues and hopefully provide more clarity as soon as possible.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)
Unusual Put Option Trade in AMC Entertainment Holdings Inc - (AMC) Worth $1,172.00KOn July 17, 2023 at 16:12:46 ET an unusually large $1,172.00K block of Put contracts in AMC Entertainment Holdings Inc - (AMC) was sold, with a strike price of $10.00 / share, expiring in 4 day(s) (on July 21, 2023). Fintel tracks all large options trades, and the premium spent on this trade was 8.56 sigmas above the mean, placing it in the 100.00th percentile of all recent large trades made in AMC options.
This trade was first picked up on Fintel's real time Options Flow tool, where unusual option trades are highlighted.
What is the Fund Sentiment?
There are 459 funds or institutions reporting positions in AMC Entertainment Holdings Inc -. This is a decrease of 16 owner(s) or 3.37% in the last quarter. Average portfolio weight of all funds dedicated to AMC is 0.15%, an increase of 87.12%. Total shares owned by institutions increased in the last three months by 3.74% to 139,073K shares. The put/call ratio of AMC is 1.70, indicating a bearish outlook.
As of July 6, 2023, the average one-year price target for AMC Entertainment Holdings Inc - is 2.31. The forecasts range from a low of 0.50 to a high of $4.72. The average price target represents a decrease of 46.60% from its latest reported closing price of 4.33.
The projected annual revenue for AMC Entertainment Holdings Inc - is 4,784MM, an increase of 17.25%. The projected annual non-GAAP EPS is -0.38.
What are Other Shareholders Doing?
VTSMX - Vanguard Total Stock Market Index Fund Investor Shares holds 16,026K shares representing 3.09% ownership of the company. In it's prior filing, the firm reported owning 16,170K shares, representing a decrease of 0.90%. The firm increased its portfolio allocation in AMC by 12.65% over the last quarter.
NAESX - Vanguard Small-Cap Index Fund Investor Shares holds 13,548K shares representing 2.61% ownership of the company. In it's prior filing, the firm reported owning 13,699K shares, representing a decrease of 1.12%. The firm increased its portfolio allocation in AMC by 16.84% over the last quarter.
VISVX - Vanguard Small-Cap Value Index Fund Investor Shares holds 9,515K shares representing 1.83% ownership of the company. In it's prior filing, the firm reported owning 9,599K shares, representing a decrease of 0.88%. The firm increased its portfolio allocation in AMC by 21.53% over the last quarter.
VEXMX - Vanguard Extended Market Index Fund Investor Shares holds 7,193K shares representing 1.39% ownership of the company. In it's prior filing, the firm reported owning 7,112K shares, representing an increase of 1.12%. The firm increased its portfolio allocation in AMC by 17.64% over the last quarter.
Geode Capital Management holds 7,165K shares representing 1.38% ownership of the company. In it's prior filing, the firm reported owning 6,891K shares, representing an increase of 3.82%. The firm increased its portfolio allocation in AMC by 18.43% over the last quarter.
AMC Entertainment Holdings Background Information (This description is provided by the company.)
AMC is the largest movie exhibition company in the United States, the largest in Europe and the largest throughout the world with approximately 1,000 theatres and 11,000 screens across the globe. AMC has propelled innovation in the exhibition industry by: deploying its Signature power-recliner seats; delivering enhanced food and beverage choices; generating greater guest engagement through its loyalty and subscription programs, web site and mobile apps; offering premium large format experiences and playing a wide variety of content including the latest Hollywood releases and independent programming.
AMC-APE Bet Has Handed 150% Gains — and 260% Losses — to Traders
Bloomberg
(Bloomberg) -- A seemingly sure-thing bet on AMC Entertainment Holdings Inc. shares has turned out to be anything but, as some traders appear to have more than doubled their money, while others lost over 250%, in just a few months.
The wide range of possible outcomes in the so-called arbitrage trade underscores a truism in these kinds of wagers: timing is everything. An analysis from data firm S3 Partners shows that simply shifting the start date of the trade by one month made the difference between losing nearly 200% — possible when leverage is involved — and gaining more than 100%.
AMC-APE Bet Possible Outcomes | Investors in the trade are buying the company’s relatively cheap preferred shares, while selling the common shares short, betting that preferreds will be converted into ordinary stock. Over time, if AMC’s plan is successful, arbitrageurs could see profits.
But so far for hedge fund managers and other investors, this meme stock has offered a wild ride. The potential results vary so much in part because the gap between the securities in the trade has fluctuated wildly. And since traders have to finance their trade, the longer it lasts, the more they can lose.
“Some people think that when you do an arbitrage trade, you’re locked in and will have a profit,” said Ihor Dusaniwsky, managing director and head of predictive analytics at S3. “But you’re not locked in on financing costs, which are eating into your profits every day, even on weekends.”
AMC-APE Spread On a Wild Ride | Arbitrage trade mirred in borrow costs, legal saga The analysis, which looked at trades made at the beginning of every month since AMC issued the preferreds last year, found returns ranging from a loss of about 260% to a gain of about 152%. Starting the trade on Feb. 1 could have resulted in losses of more than 190%, while a month later, the trade would have more than doubled investors’ money.
The trade stems from AMC’s status as a meme stock company. It sold common equity to retail investors to raise money for acquisitions. Then it reached the maximum number of shares that its corporate charter allowed it to issue, spurring it in August 2022 to create preferred stock that it called AMC Preferred Equity Units, or APEs.
It sold additional APEs as well, and then sought approval from both classes of investors to convert APEs into common stock. Some common share investors objected to the way that approval process was put together, and sued.
The company negotiated a settlement, which a Delaware judge rejected last week. Then AMC revised its plan, and investors are now hopeful that it will win approval to essentially convert preferreds into common. While originally each APE share was meant to convert into one share of AMC common stock, after the revised plan, the conversion will effectively be one APE share is equal to 0.882353 shares of AMC.
Racing Against TimeS3’s analysis assumed the trader was posting an average daily margin of 15% of the market value of both the long and short positions with their prime broker, recalculated daily to account for swings in asset prices, with variation margin added or subtracted. The profit or losses calculated were based on the assumption that the conversion happened on July 24, and also included borrowing costs.
The timing for any conversion remains unclear, and the longer the process extends, the harder it will be for many investors to profit from the arbitrage. But some investors can make money even if they unwind now.
“In March, all these trades were profitable,” S3’s Dusaniwsky said. “It’s only later that a lot of these trades became unprofitable.”
Figure 1: What Does AMC Stock Have to Do With the Collapse of Credit Suisse?
The 