In layman's term, Rishi is trying to create a spread which will always be profitable for him for any given price or any given direction. What harper did was the inverse, she guaranteed her customer the spread profit and Rishi sat on a loss immediately
I view this differently. No one made or lost money on this individual trade. Bloom is going further short. His ultimate gain or loss won't be realized until he really does buy to cover his massive short position. As for Rishi, he didn't realize any gain or loss immediately. Rishi got stuck being long ~19MM shares of FastAid for which he paid $92.95. If Rishi can find someone willing to buy at a price greater than $92.95 then he will ultimately make money. We see just a few minutes later that the stock does go up in price. Harper looks panicked and Rishi looks happy. The one thing we sort of do know is that Harper's little trick cost Rishi $1.895MM. Since Rishi never thought Bloom was going to buy, Rishi went ahead and raised his bid by 10 cents. Had Bloom sold at Rishi's original bid of $92.85 rather than Rishi's elevated bid of $92.95, Rishi still would have been stuck with a boatload of shares he didn't want, but he would have paid $0.10 less per share. When you're talking 19MM shares, the dimes add up.
Amazing explanation, just a small caveat: Rishi is actually quoting his entire spread not just the ask price aka the 'buy' price. Some people might think that Bloom is selling the share at Rishi's ask price but no he's selling at his bid price only which is "95 55 around 3" i.e. bid price 92.95 (at the end harper says, "...sells at 295"). Because the first scenario would've constituted fraud. The primary tensity of the situation is that the spread that Rishi creates is assuming that Bloom's buying which frankly is on him.
Rishi doesn't assume, Harper specifically states an outright lie at 10:07 "you know his direction. he (the client) has to BUY to cover the stop out" then she reverts it to "he SELLS", or at 12:06 she claims "not the direction". how more clear has to be that Harper lied and should be arrested? this is like exchange fraud, give you paper clippings instead of money
What's really cool about the show is that they get a few things right, but most of it is over dramatized. The thing is that is more unrealistic is that everyone is much too young and good looking, and people are given way, way too much responsibility, much too quickly. Also they make it seem like trading is this magical skill when in fact what happens is that you absorb the knowledge by just sitting in the bank. Also most of the stuff in the series would get shut down by some regulator or by risk management.
I have a slightly different interpretation of the action. Rishi was quoting both his bid price AND his ask price. Rishi started by saying he has a 60 basis point spread on 18.952 million shares ("60 points wide around my mid on 18 spot 952 million if he guarantees the trade now"). I didn't hear the actual bid or ask price, just a 60bps spread around Rishi's mid. He does say "last trade was 92 trading up". The first actual price I hear is when Rishi says "85 45 around 3. You like it?". That's a bid of 92.85 and and ask of 93.45. There's the 60 point spread. I agree Rishi thinks Bloom is going to buy at Rishi's ask price. Rishi then retracts that quote and requotes - "off, higher now make him 95 55. I'm taking him to the cleaners". That's a bid of 92.95 and an ask of 93.55. Again Rishi thinks Bloom's going to buy at 93.55. This is when Bloom and Harper surprise Rishi by selling at Rishi's bid price rather than buying and Rishi's ask price. "Bloom sells 18.952 million shares at 295." The '295' means 92.95 which was Rishi's bid price. "He guaranteed you a trade on your spread on your price - not a direction." Harper's point is that when Rishi quoted "95 55" Rishi was agreeing to sell shares at 93.55 OR buy shares at 92.95. Although Rishi thought all along that Bloom was going to buy at 93.55, technically Rishi also quoted an opportunity for Bloom to sell at 92.95 - which Bloom did. I question Harper's hand signal. I think the "sell" signal should be fingers up with palm facing toward Rishi - as though she's pushing something away from her and towards him. As opposed to a buy signal which would have her palm facing herself as though she's pulling something towards her.
I think Rishi certainly thought Bloom wanted to buy - particularly because Harper told Rishi that Bloom was in max pain. Bloom's massive short position was losing money, so she let Rishi believe that Bloom was now ready to buy to cover his short position. When in fact the actual trade Harper and Bloom were working was to short even more FastAid. By having Rishi believe Bloom wanted to buy, Rishi wasn't at all hesitant to raise his ask. He even said " Dodd-Frank" as he was jacking up his price (which actually should have been MIFID, not Dodd-Frank, since they are in London). The problem is that Rishi was raising both his bid AND his ask - not thinking Bloom was going to sell (short) at Rishi's bid price.
Rishi is continually quoting bid and ask prices. When he first says "85 45 around 3", the 'around 3' phrase means either side of $93 since he starts the whole exchange by stating where the stock last traded. Once he's established quotes as being 'around 3' or around $93, he no longer needs to say '93' or even '3'. All he has to do is quote the cents figure because the dollar amount is implied. So "85 45 around 3" means bid of $92.85 and an ask of $93.45. Rishi then raises the quote by 10 cents simply by saying "off...95 55". Again, the dollar amounts are implied because it's still around 3 (i.e. either side of $93). He doesn't have to say 'ninety-two ninety-five' or 'ninety-three fifty-five', he just says "95 55". It's clearly not a single price quote of $95.55 for several reasons: 1) he's a trader and a market maker, therefore he's always buying and selling making money from the spread. It's in his nature to quote bid and ask prices even if his only real intention is to sell as his ask price. 2) he already said he has a 60 bps spread. $92.85 / $93.45 is a 60bps spread, as is $92.95 / $93.55. 3) he already said 'around 3' meaning either side of $93. 4) Harper and Bloom clearly understood he was also quoting bid prices because they accepted his bid at "two ninety-five" meaning $92.95.
the logic you explained is right, but the way she did it is that for many securities there is a requirement to quote the mid and an expectancy that the bid and ask are obviously symmetrical around the mid. The trader is going to inflate the mid if he thinks the client is buying in order for the ask to be more expensive, so that's the way how she got the bid inflated as well as the trader was locked in in either direction once he quoted a mid and a spread.
Yeah this is the bit I never understood, she clearly says "bloom needs to buy to stop out". She clearly told him the wrong thing, not simply made him read her wrong.
@@arrons4485 Yes she did "mispeak", but know it's not illegal. Harper has a legal duty to have the best price for her client and if it means screwing over someone else at the bank, she would be obligated to to it. In practice no regulator would allow Harper and Rishi to be in the same group, but if they were in different groups, then this would be okay and in fact encouraged since Harper was getting her client the best price.
@@luisdelatorremoreno8756There are actually many hand signals used in open outcry trading pits or floors, depending on the contract and venue. There are a number of videos on Chicago Board of Trade hand signals. Unfortunately, most open outcry trading environments are now closed. The last active trading floor in London, to my knowledge, is the LME or London Metal Exchange, which is actually a very small, very specialized, and indeed, VERY interesting trading setup. Some really good videos and articles about it online, if you are interested in trading or just learning more about the way this world works. These hand signals do continue to be used, but now between traders in the same company, and will likely slowly die as a result of being no longer truly necessary. Progress and technology
The customer sells so is closed not short, choose your words carefully if you want to be a successful trader. Your explanation overcomplicates the trade, a sure sign that you don't understand it well enough.
I saw this show. It made me cringe about the extremely toxic work culture that they have portrayed and from what i have read, it is very accurate! I wouldn’t survive an hour in a work environment like this :)
I used to work in banking, and in fact, the team that I worked on was nowhere near this toxic. On the other hand, people are really tribal in the bank, and so I can imagine another MD making lives miserable. One thing that they don't seem to mention is that the stakes really aren't that high. You will get hired and fired for random reasons, and if they get let go after the internship no one is going to starve.
