Trading Trends: March, 2020
In unprecedented times, our trading data shows so many different reactions to the same events. We take a look at trading trends amongst the Stake community.
Stake exists to give people around the world access to opportunities. We stay objective, instead allowing people to invest or trade their way and seize opportunities they believe in, regardless of market conditions.
With that overarching mission, we are in a position to see so many different responses to the same events. And during such unprecedented times, we thought it would be useful to share what the Stake community are trading.
With the volatility abound, it makes sense that more trades are being made. Since the beginning of 2020, the number of trades has increased 4 fold. This does not mean that every Stake customer is making 4 times the number of trades, as new investors and traders are joining the Stake community.
In late February, sell side trades grew much faster than buy sides. Historically the daily buy to sell ratio on Stake was 2:1 (meaning 2 buys to every sale). In the last week of February that ratio was closer to 1:1. In that same week, the actual dollar amount of shares sold was more than dollars invested for the first time.
However, after the strong moves south, buyers have stepped up to the plate, with more trades on the buy side (the buy:sell ratio for trades went back toward 2). It’s really interesting that the buying has been for smaller amounts, with the average trade size on the sell side being double as much, meaning total $ traded on the buy side and sell side through March has been equal.
In the last few days, the popular tech names (Apple, Amazon, Microsoft, Tesla and Facebook) have been picking up steam, with the buy:sell ratio close to 4:1 (4 buys for every sell). During the last week of February it was below 2, the lowest it’s ever been over any 5- day period.
We’d be speculating to work out everyone’s intentions, but clearly some investors are seeing value at these levels after the falls – most of these stocks are down 20% for the month, with TSLA down closer to 50%.
The amount of trading in the Volatility ETFs came up on our radar a few weeks ago when the CBOE VIX started heading north in February. This would be usual activity for any brokerage platform during times like this – investors and traders gravitate to the VIX and its related products in times of uncertainty.
The amount of activity in the 4 long VIX related products (VXX, UVXY, TVIX and VIXY) is now 35 times higher than it was in January. With TVIX up 1000% in the last 3 months (with the VIX up ~5 fold), this is not surprising.
As these instruments are structured to provide daily returns based on the movement of the VIX index, they “reset daily”. This means investors in them can be punished if the VIX reverts back after a spike. This phenomenon (plus the fact they are volatile) probably explains why the buy:sell ratio for all names hovers around 1.
Much like the VIX related ETFs, when markets fall, there are still products that allow investors and traders to generate returns.
These inverse index ETFs (SQQQ, SDS, SPXU, PSQ, RWM and TWM) track the main US indices, being S&P500, Nasdaq100 and the Russell2000….Sorry Dow Jones…you just ain’t that important anymore.
Side note, if you ever did want to get short exposure for the Dow, you’d be looking for the ticker DOG…without a doubt one of the most apt named ETFs out there.
Anyway, back to the analysis.
These inverse index ETFs have also been having their time in the sun, with a 25 times increase in their daily trading volume since the beginning of the year.
It looks like there have been some real winners in these names for the Stake community here with the buy:sell ratio averaging around 2 since January.
With some of these names, like TWM (2x Inverse Rusell 2000) up 100% for the month and SPXU (3x short SP500) up 50% since February, it shows that you can make something of a tough situation.
The above is analysis of real trading data we’re seeing on Stake and is not investment advice.