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Finance: What is speculation?
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Finance: What is program trading? 14 Views


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Description:

What is program trading? Program trading refers to the use of computer algorithms to place and execute large volume, multiple buy and sell orders of a basket of securities simultaneously, predicated on predetermined, calculated parameters. The NYSE categorizes a basket of a minimum 15 different securities and $1 million valuation as program trading when linked to a systematic strategy.

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Transcript

00:00

Finance a la shmoop what is program trading? okay well watch two episodes of

00:08

Big Bang Theory if you first watch one episode of Keeping Up with the [Man and woman watching TV]

00:12

Kardashians deal alright no different kind of program trading, program trades

00:17

in a Wall Street sense are run by a computer program, hence the catchy name

00:22

and it's also called the black box like a program kicks out that if the S&P 500

00:27

is down 0.3 percent in an hour and the US dollar has risen relative to the

00:31

pound and goog is outperforming the tech index and the moon is in the seventh

00:36

house and Jupiter is aligned with Mars then short a million shares of GE like

00:42

that would be something that the box would tell you or something like that

00:45

and there are a ton of weird mathy things behind the rationale for each of [Math formulas appear]

00:50

these trades some of it makes sense to normal people but most of it needs three

00:55

PhDs in math and physics and other stuff to translate rationally

00:59

well the dangerous thing here about program trades is that usually there is

01:03

no human involved when they execute a trade that is it's just computers

01:07

talking to other computers but thankfully computers never have glitches [Computer chip blowing off steam]

01:13

right they never have mistakes and things generally always run smoothly

01:17

when computers are involved right well this is a really smart way to manage

01:21

your retirement money just give it all to a black box and assume the guys who

01:25

wrote the algorithm knew what they were doing or maybe not [Hacker using a PC]

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