Pick a number, any number

...and that's what you can call the low in cable after tonight's stop loss screw job.


Earlier in the day, sterling finally reached the 1.2650 target that Macro Man's Brexit model predicted in June.  Tempting as it may be to see tonight's price action in allegorical terms, this kind of move says a lot more about gray zone liquidity and stop loss placement than it does about Britain's medium term future.

Still doesn't mean it didn't hurt if you were one one of the poor buggers stopped out, or if you're long Gilts without being fully FX hedged.  While Gilts haven't notably underperformed other bond markets recently, FX moves like this certainly won't help sentiment; a break of 128 has 124 written all over it...


The good news from the government's perspective is that if GBP/PLN keeps this up, the immigrant labour issue will sort itself out.....


Previous
Next Post »

22 comments

Click here for comments
johno
admin
October 7, 2016 at 1:14 AM ×

Free money. If I'd noticed it five minutes earlier, would have been crazy free money. And if ten minutes earlier, I'd have crapped my pants.

Reminds me of the crash in ZAR that Sunday/Monday this January.

Reply
avatar
Anonymous
admin
October 7, 2016 at 1:34 AM ×

wow, has anybody been caught by that GBP crash? Got to be some clever kid play the system. Remind me the CHF bloodbath last time.

Reply
avatar
johno
admin
October 7, 2016 at 2:00 AM ×

Hearing "100% long GBP" Nico was the 1.14 print. Bad things happen to those who disrespect the MM ...

Reply
avatar
fcp
admin
October 7, 2016 at 2:09 AM ×

All those stops... If this was an equity market I would call a bottom.

Reply
avatar
Mr. T
admin
October 7, 2016 at 2:35 AM ×

Looks flash-crashy to me. I have a straddle on in IWM (US Smallcaps) - hear me out please. The "Finra Tick Size Pilot" may not sound like the most flashy thing but its a big test that started this week in the US to take a group of ~2k smallcap stocks, assign them to various test groups that are all variants on "minimum nickel spread". Variants are stuff like "can trade midpoint in dark pools, or not". As part of the program (scheduled to last 2 years) at least some market makers have to report profitability figures, which they have vigorously protested, some saying they will just not trade those stocks to avoid reporting. So a) a bunch of new nickel-wide algos are being deployed on the street and b) some big liquidity has said they may walk away. Sounds like a recipe for some illiquid moments in smallcaps to me.

Thoughts?

Reply
avatar
washedup
admin
October 7, 2016 at 2:40 AM ×

I don't know if it was flash crashy before you wrote your comment, but it certainly is now!

Pssssttt… did you hear what this commentator on Macro Man's blog said the other day…..

Kidding aside, I feel like these tsunamis are easy to predict but impossible to time - I have a lifetime of wasted option premium to prove that point.

Reply
avatar
Gee
admin
October 7, 2016 at 3:06 AM ×

The revenge of the curse of Freddy Fatfinger. Even I learned not to use stops in a rigged market. I hope this one wasn't too painful for you.

Reply
avatar
Polemic
admin
October 7, 2016 at 3:06 AM ×

Very Eur/Chf. Going to be carnage for the poor fx sales folk trying to explain the overnight fills in the morning.. i can 9nly imagine what the dealing rooms are like..

http://polemics-pains.blogspot.co.uk/2016/10/gbp-goes-eurchf-whats-going-on.html

Tbh . I ve gone the .its a base.. route and though stopped out yesterday have bought gbp in bigger than i should in one of my last ditch.. "this is the base and if not I'm out and not playing anymore" trades.

Reply
avatar
JohnL
admin
October 7, 2016 at 3:07 AM ×

Flash crash coincident with Hollande conjuring Edward the II.

https://www.ft.com/content/5f84e4c4-8c17-11e6-8aa5-f79f5696c731

Reply
avatar
Polemic
admin
October 7, 2016 at 3:07 AM ×

Very Eur/Chf. Going to be carnage for the poor fx sales folk trying to explain the overnight fills in the morning.. i can 9nly imagine what the dealing rooms are like..

http://polemics-pains.blogspot.co.uk/2016/10/gbp-goes-eurchf-whats-going-on.html

Tbh . I ve gone the .its a base.. route and though stopped out yesterday have bought gbp in bigger than i should in one of my last ditch.. "this is the base and if not I'm out and not playing anymore" trades.

Reply
avatar
Anonymous
admin
October 7, 2016 at 3:38 AM ×

Not sure how one can compare this flash crash to the CHF event. CHF was headline driven and had some implications on CHF markets in general (rates/ equity), this one on the other hand is completely liquidity (non- liquidity) driven and prices should revert quickly, though a premium will probably will be priced in for some time in GBP options- not sure if people will stop quoting them as with CHF, as again there is no CB behind this move, in general pricing for exotic options in any currency will be more difficult to obtain now, in any currency, as what is the guarantee this move want' be repeated in any other pair>

Reply
avatar
Nico G
admin
October 7, 2016 at 4:32 AM ×

my dear johno boy i was involved in the 1.18 print not the 1.14

buying the crash, though, i expected a horrible stop run under 1.25 - so currently officially long cable, past the 100% GBP now 120% GBP / -20% USD

there is nothing wrong with seeing those price when you loaded at 1.31 - it allows to pick pieces, that's the beauty of never sleeping

what is wrong is being trapped at 1.50 since Brexit 'guaranteed' no. We call that 'saloon doors', buying the 1.50 and selling under 1.25

the myriad of friends who've been in London for 15/20 years are all in pound they dislike EUrope and do not trust the US. They also thought 1.50 was the beginning of the pound recovery ahem, not the end. Can't be pleasant short term but you need to focus 1/2 years ahead - the UK is the next Norway/Switzerland in terms of currency heaven, the speculation just had to pass and such wild move smells like capitulation indeed

you buy when people puke - if anyone was cautiously waiting to pick up pounds on the cheap this is the moment

meanwhile

still short 150 spoos and waiting, see you all at 1830 don't want to participate to current forum unless it makes sense to good luck

Reply
avatar
WidowMaker
admin
October 7, 2016 at 5:20 AM ×

Welcome back Nico :)

Reply
avatar
Anonymous
admin
October 7, 2016 at 5:28 AM ×

Nico ... what's your time frame for that 1830?

Reply
avatar
Anonymous
admin
October 7, 2016 at 5:31 AM ×

Kill the fattened calf. The prodigal son has returned... again.

Reply
avatar
WidowMaker
admin
October 7, 2016 at 5:43 AM ×

@anon 5:31 why you gotta hate bruh? Why can't people come here to actually discuss macro and find some sort of community in this lonely pursuit? Live and let live man..

Reply
avatar
checkmate
admin
October 7, 2016 at 6:49 AM ×

On the bright side you can bet the newspapers will be on this today like flies around shit giving truth to the adage that headlines means it's over. Did anyone ever get a really good buy the news position?

Reply
avatar
Michael
admin
October 7, 2016 at 6:57 AM ×

A couple of thoughts:

1) the "stop loss screw job" is a great identifier for this soon to be historic event. It rolls of the tongue like "flash crash" while avoiding the "which way were we going again?" angst of "reverse flash crash".

2) If you are an FX trader living/working above your mum's garage and have not begun packing up and destroying evidence of your activities yet, the clock is ticking and you probably only have a few brief years remaining before the authorities come knocking.

Reply
avatar
Nico G
admin
October 7, 2016 at 10:29 AM ×

anon 5:28

you will need patience because 1830 shall be seen from now to end Q1 next year

and possibly, the low 1700s

Reply
avatar
Anonymous
admin
October 7, 2016 at 11:09 AM ×

Thanks Nico ... all the best.

Anon5:28

Reply
avatar
Ka800M
admin
October 7, 2016 at 1:39 PM ×

On the other hand all the EE immigrants that saved some pennies are less willing to move back to their home countries as this means MTM of their savings :)

Reply
avatar
johno
admin
October 7, 2016 at 4:08 PM ×

Nice to see you posting, Nico :)

Reply
avatar