By Alan English
How's the market doing?
It's a question that trips off a lot of tongues every day in America.
And the answer nobody's got a clue. Cast-iron proof that this is the
most nervy, uncertain market in a decade or more can be found each day on
tradesports, a P2P trading site with 9,000 members and growing.
It started off trading sports contracts - and they are still the backbone of
the Dublin-based company's business - but the new thing is speculating on the
Dow's, Nasdaq's or S&P's performance. Dedicated market watchers have a new
meeting place, an electronic one, where they can assess market confidence at a
glance.
You want volatity? It's all here. Just check out the trading graph for the
Dow contract for Thursday, February 13. If ever there was proof that this market
is all over the place, it's there.
There are several Dow-related contracts but possibly the most popular with
traders is the one which simply states that the Dow Jones Industrial Average
will finish up on the day. If you believe that, you buy the contract. If you're
bearish, you sell. Simple as that.
The contract was trading at 50 early in the day, which essentially meant that
traders were undecided about how the market would perform - they gave it a 50
per cent chance of finishing ahead of the previous day's close, 7758.17.
All of a sudden, confidence started sinking like a stone and it almost fell
off the graph. At mid-session, you could have bought the contract at an
incredible 1. Talk about bargain basement, because what followed was equally
amazing.
The market began to rally. Stocks came off the day's lows in late afternoon
as some investors took a chance on recently battered stocks. And from being dead
in the water, the tradesports Dow contract suddenly shot upwards and reached
70.
Trader astute enough to have bought at 1 - a price at which potential losses
are absolutely minimal - now had the opportunity to sell the contracts back to
the market and make a stunning 69 ticks of profit.
And if those traders had been paying attention, that's exactly what they
would have done. Because ever since these contracts were launched, they have
been jumping all over the place at the merest hint of a war-related rumour.
And that's what happened again.
Tension about a possible March 11 style attack was heightened when police
closed a terminal at Britain's Gatwick airport after stopping a man carrying a
live hand grenade, and when New York City's Brooklyn-Battery Tunnel was closed
while a suspicious package was investigated. That did it. The market had a
sudden panic attack and all the earlier gains were wiped out. It finished down
8.3 points - very bad news indeed for those bullish enough to buy at the top of
the market. Winners and losers are all members of the exchange, because
TradeSports is not a bookie. It makes its money by charging $0.04 per contract
traded. How's the market doing?
Today it starts all over again. The market-watchers of TradeSports will be
back for more action.
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