Anyone notice weird action in the CBOE VX (volatility) contract? The DJIA was flat and the VX gave a reading of 14.40-14.45 …2 hours later the market is down 10 points and the VX is 14.25.
Aren’t they supposed to be inversely correlated? The contract is mean reverting, so even if the baseline volatility is lower, it doesn’t make sense that is would fall in such a manner, unless it were being manipulated somehow.
Anyone that actually trades the market would notice that the alleged HFT Michael Lewis writes about pales in comparison to the actual manipulation that goes on in futures, options, and other financial instruments. Probably the real market manipulators are happy Michael Lewis created this red herring to divert attention from the more nefarious activity.
The manipulation in the options market is just as bad. You see an option quoted for 1.5 bid 1.7 ask. You place a buy order at 1.6 and it goes unfilled even though the midpoint is the quoted price. Selling is the same. If the option is quoted at 1.5 bid 1.7 ask, you can only sell at 1.5 even if the account reads 1.6. So not only do you lose money from the commission fee, but also from the spread. If options were as liquid as stocks, traders would get a better price, yielding one immediate benefit of HFT which is smaller spreads and, consequentially, cheaper trades.
To the folks that run the game, Michael Lewis is a useful idiot.