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Strategies & Market Trends : SOES Trading
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To: Jay Morrison who wrote (1197)1/19/1998 3:37:00 PM
From: Michael Friesen  Read Replies (1) of 1618
 
Jay,

I SOES traded about a year ago (in school now).

Trading based on bid vs. asked size would work on balance if one could get executions when one wanted them. Unfortunately, your fills might be 1/8 or 1/4 worse than you would expect. The reason is that MM's are only obligated to fill a certain volume on SOES (the rules change around, maybe it's still 1000 - anyone know). After they fill this amount they have 20 seconds to update their quote before they can get SOESed again. So while an apparent supply/demand imbalance on your screen may well imply that the price is about to change, you may not be able to take advantage of it in real life.

I remember lots of guys who averaged $3000+ on paper per day (net!) for weeks, but did not do quite so well (!) when they were trading real money. Among other things, the situation I have just talked about was often one of the reasons.

Michael Friesen
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