The first market Scott references is a Ventuals market which purports to function as a future on Anthropic stock value. This is my first time hearing of Ventuals, and I’m going to ignore the question of whether the mechanism behind this product actually works. Let’s just look at the liquidity of the market. I looked at the volume traded over the four day period (Friday to Monday) that Scott is talking about. I found there was ~$600,000k in volume (which is honestly better than I expected). What kind of trading would have produced the market behavior we saw -- $530 to $480 and back to $530 (a ~10% move down and back) in $600k of volume? Let’s take a look at the order book to see how much this market will move based on trade size. (I don’t have the historical order book available so I’m using the current order book.)
A $40k sell would move the market down ~10% here. The Friday-Monday price behavior could be explained by a single person selling $40k on the news and then changing their mind the next day and buying $40k back! Of course, this is just one possible scenario… but it illustrates that the numbers involved here are small enough that a single, not particularly rich person could single-handedly move these markets. Another way to think about this is: how much money could a good trader realistically have made here? I looked more closely at the volume and price data (not pictured here) and found that ~$200k traded on Friday as the price went from $530 to $480 and stayed around $480. Given that there are significant up candles in this period and the expected price movement per $ that we found earlier, this matches up pretty well with something like $125k selling and $75k buying. Let’s say you have good reason to believe that this news shouldn’t affect the value of this product. Maybe you buy 30% of the selling volume at an average of $500, and close your position at an average of $525. Then you’d make (525-500) dollars per share with .3*125k/500 shares traded for a grand total of $1875.
It’s hard to say because it depends on who’s trading. If every trader is putting in $100 orders, then a market move probably represents a real probability change, not just a liquidity issue. But the market will pop if a single trader puts in a $100K buy order.
Appendix: Ventuals Market
The first market Scott references is a Ventuals market which purports to function as a future on Anthropic stock value. This is my first time hearing of Ventuals, and I’m going to ignore the question of whether the mechanism behind this product actually works. Let’s just look at the liquidity of the market. I looked at the volume traded over the four day period (Friday to Monday) that Scott is talking about. I found there was ~$600,000k in volume (which is honestly better than I expected).
What kind of trading would have produced the market behavior we saw -- $530 to $480 and back to $530 (a ~10% move down and back) in $600k of volume? Let’s take a look at the order book to see how much this market will move based on trade size. (I don’t have the historical order book available so I’m using the current order book.)
A $40k sell would move the market down ~10% here. The Friday-Monday price behavior could be explained by a single person selling $40k on the news and then changing their mind the next day and buying $40k back! Of course, this is just one possible scenario… but it illustrates that the numbers involved here are small enough that a single, not particularly rich person could single-handedly move these markets.
Another way to think about this is: how much money could a good trader realistically have made here? I looked more closely at the volume and price data (not pictured here) and found that ~$200k traded on Friday as the price went from $530 to $480 and stayed around $480. Given that there are significant up candles in this period and the expected price movement per $ that we found earlier, this matches up pretty well with something like $125k selling and $75k buying. Let’s say you have good reason to believe that this news shouldn’t affect the value of this product. Maybe you buy 30% of the selling volume at an average of $500, and close your position at an average of $525. Then you’d make (525-500) dollars per share with .3*125k/500 shares traded for a grand total of $1875.
Is $600k a lot of money for one future on a niche trading platform? I feel very uncertain about this fact.
It’s hard to say because it depends on who’s trading. If every trader is putting in $100 orders, then a market move probably represents a real probability change, not just a liquidity issue. But the market will pop if a single trader puts in a $100K buy order.
In the context of financial markets, $600k is extremely small. Here are some ~average daily volumes for context:
US 10yr treasury futures (extremely high volume): $200bil
MSFT (very high volume stock): $13bil
NWS (~smallest stock in SP500): $35mil
GME (GameStop): $150mil
In the context of a niche trading platform? Idk. I was surprised because I didn’t realize this market existed at all.