I don’t know enough about how equities trade during earnings, but I do know a little about how some other products trade during data releases and while people are speaking.
In general, the vast, vast, vast majority of liquidity is withdrawn from the market before the release. There will be a few stale orders people have left by accident + a few orders left in at levels deemed ridiculously unlikely. As soon as the data is released, the fastest players will general send quotes making a (fairly wide market) around their estimate of the fair price. Over time (and here we’re still talking very fast) more players will come in, firming up that new market.
The absolute level of money which is being made during this period is relatively small. It’s not like the first person to see the report gets to trade at the old price, they get to trade with any stale orders—the market just reprices with very little trading volume.
All of the money-making value was redeemed before people like you and me even had a chance to trade. Right?
Correct, you absolutely did not have the chance to be involved in this trade unless you work at one of a handful of firms which have spent 9 figure sums on doing this really, really well.
I don’t know enough about how equities trade during earnings, but I do know a little about how some other products trade during data releases and while people are speaking.
In general, the vast, vast, vast majority of liquidity is withdrawn from the market before the release. There will be a few stale orders people have left by accident + a few orders left in at levels deemed ridiculously unlikely. As soon as the data is released, the fastest players will general send quotes making a (fairly wide market) around their estimate of the fair price. Over time (and here we’re still talking very fast) more players will come in, firming up that new market.
The absolute level of money which is being made during this period is relatively small. It’s not like the first person to see the report gets to trade at the old price, they get to trade with any stale orders—the market just reprices with very little trading volume.
Correct, you absolutely did not have the chance to be involved in this trade unless you work at one of a handful of firms which have spent 9 figure sums on doing this really, really well.