Remembering the 2:45 pm Stock Market Crash
Wednesday, May 12, 2010 at 7:29AMWritten by Michael Bigger. Follow me on Twitter.
On May 6, 2010 at about 2:45 pm, the stock market experienced a stunning 9 percent drop followed by a partial recovery. The frantic action was over by 3 pm.
I am writing this post to keep a record of the events and to show how we reacted to the precipitous decline.
Let's start with a dramatic recording of how the events unfolded in the S&P 500 futures pit (the graph of the price action is at the bottom of the post):
Market Crash Recording (Duration: 11 minutes)
Our algorithm made 70 basis points on that day. This is a pretty good result considering the SPYs were down about 3.50 percent. More importantly, we had the opportunity to see how it behaves during a sharp drop. This was a dream come true as the algorithm stayed positive throughout the episode.
The algorithm did very well because during the fall, it unwound the stocks in the portfolio that did not move very much, according to our metrics, and it bought stocks that were decimated. When the gap between each group of stocks narrowed after 3 pm we generated profits. We doubt we could have taken advantage of this discrepancy without the help of computers.
How did you do on that day?
Here is a list of my Twitter posts during that day (if you can't tolerate some cursing don't read these posts):
Going to write a blog post tonight about today's events. I want my kids to read it when older $$
7:18 PM May 6th via TweetDeck
esoap
All charts useless without removing the hour horribilus. As goes the hour so goes the annus? A true test for Dippy and the invisible hand$$
5:46 PM May 6th via TweetDeck
@Maelstrom01 well played! Yes , via my gigantic position
4:51 PM May 6th via TweetDeck
@TVN_Kevin Cheers Kevin! What a crazy day.
4:51 PM May 6th via TweetDeck in reply to TVN_Kevin
@chicagosean thanks the RT. Ihope you have a good one also!
4:48 PM May 6th via TweetDeck in reply to chicagosean
@momomiester I got it now. On the selloff, my algo lit up green, so in addition to it buying stock, I tried to buy as much as everything
4:28 PM May 6th via TweetDeck
Time for a beer on the trading desk. Well deserved $$
4:21 PM May 6th via TweetDeck
@momomiester confused about the question. in Algorithm book, we trade like crazy. Not in investment book
@Maelstrom01 In our investment book we buy 1 stock once every 3 years or so. $crox is a huge position
4:16 PM May 6th via TweetDeck in reply to Maelstrom01
$onty halted
4:13 PM May 6th via TweetDeck
$crox look at these growth rates!
4:10 PM May 6th via TweetDeck
@MikeDancy easy mr. Dancy... GO HABS GO! ;-)
4:06 PM May 6th via TweetDeck in reply to MikeDancy
crocodile scaring the hell out of shorts. $crox
3:47 PM May 6th via TweetDeck
$crox on deck, shorts are covering
3:45 PM May 6th via TweetDeck
options markets widening big. Money for IB $IBKR
3:44 PM May 6th via TweetDeck
very impress by how Interactive Brokers's API and connectivity handled the load $IBKR
3:41 PM May 6th via TweetDeck
@borjasluis bought $crox at 8.54 can't beliueve this
2:58 PM May 6th via TweetDeck in reply to borjasluis
everything RT @borjasluis: @biggercapital jajajjaa, What are you buying? your algo must be given you a market take over, buy, buy, buy
2:57 PM May 6th via TweetDeck
Mortimer: I am fuckin buying!
2:51 PM May 6th via TweetDeck
Greece can keeps its olive, we'll keep our cash RT @hblodget: Stock market crashes as Europe implodes http://bit.ly/dh6vYZ Dow down -230
2:14 PM May 6th via TweetDeck
SPY Price Graph
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