Today the Tesla stock dropped by around 250$ for a few minutes. Can anyone explain me the background of this? I have seen quite a few times with a few stocks. As far as I know, this happened in the after-market hours, so did someone drop his huge amount of stocks?
I can give you two explanations how this could occur.
The obvious explanation is that it's bad data. Someone just entered the wrong numbers.
Another possibility is the mechanics of order placement. For example, right now Grainger (GWW) has a quote of:
- $264.00 x $353.00 with a last trade of $274.5, down $5.71
Let's do this with a buy order because the ask price is way out of line with the price of the last trade.
On a trading platform, when you want to buy, click the ask price and it opens a window with $353.00 in it. If you click send, you'll buy at this crazy price. Suppose you want to place your order with price improvement, say at $273. If you manually type in $273.00, all is fine. But if you edit the line and change the 5 of $353.00 to a 7, you've entered $373.00 and if you click send without double checking, you've placed a market order to buy at $373. With the ask at $353, nearly $78 above current price, that's what you'll pay. OUCH. Not double checking price entry results in a fat finger trade. It happens.
For TSLA, the fat finger trade isn't likely because it tends to trade with a reasonably tight spread during after hours. More likely, it's bad data.