Execution edge of pit traders and intraday price ranges of soft commodities
Intraday activity of open outcry pit traders and mechanics of price formation are important for short-term traders, money managers and regulatory bodies. In particular, congestions of stop-loss and limit orders, as well as subsequent highs/lows of the daily prices are among the most important features traders are interested in. We present a comparison of range-based and close-to-open volatility estimators for US-traded soft physical commodities. The comparison indicates that pit traders are able to identify the congestions of pre-placed stop orders, reach them and liquidate on them, or let the prices run. The comparison also suggests a substantial execution edge of soft commodities pit traders compared to currencies traders.
Applied Financial Economics
Execution edge of pit traders and intraday price ranges of soft commodities.
Applied Financial Economics,
Retrieved from: https://digitalcommons.mtu.edu/michigantech-p/9341