3

I am just curious that for the stock FEYE there was a very boost in the price and then back to normal level (at least close to the average) again.

The volume for that boost trade is 27.60k, not a small one. As given in Google Finance.

What could cause this? Or it's all just by random?

enter image description here

  • Chances are traders winding up their open positions. – DumbCoder Dec 4 '14 at 10:13
  • @DumbCoder so if I ask a friend to work together, say I sell at 40 and he open an order to buy at 40, then the price boost to 40? Then it can boost to any price? – AGamePlayer Dec 4 '14 at 11:25
  • That is a very unlikely scenario. It depends on the liquidity in the after hours market, not on your(mine) assumption. – DumbCoder Dec 4 '14 at 11:45
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    Yes, why not. A buy order matches a sell order so it should go through. Why do you doubt that ? – DumbCoder Dec 4 '14 at 14:20
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    In low-trading times, all it may take is one share, selling at an unreasonable price for any unreasonable or obscure reason (or simply in error), to introduce that blip. Of course the next share sold at a reasonable price brings it right back to reality. – keshlam Dec 4 '14 at 16:38
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Often these types of trades fall into two different categories.

  • An error by broker or exchange. Exchange clearing out part of their books incorrectly is an example. Most exchanges make firms reopen their positions for after market hours. There may have been an issue doing so or exchange could incorrectly cancel positions. I was in the direct feed industry for years and this was a big issue. At the same time the broker can issue a no limit buy on accident (or has software that is prospecting and said software has a bug or written poorly).

  • unscrupulous parties looking to feign an upswing or downswing in market. Let's say you hold 500k shares in a stock that sells for $11. You could possibly buy 100 shares for $13. Trust me you will find a seller. Then you are hoping that people see that trade as a "norm" and trade from there, allowing you to rake in $1M for spending an extra $200 - NOTE this is not normal and an extreme example. This was so common in the early days of NASDAQ after hours that they discontinued using the after hours trades as part of historical information that they keep like daily/yearly high or closing price. The liquidity allows for manipulation. It isn't seen as much now since this has been done a million times but it does still happen.

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Many of the above comments are correct about illiquidity. If someone needs to trade at a time of low liquidity, for instance when the markets are closed, the bid/ask spread can often be large to induce someone to trade at odd times. Especially as the broker/bank on the other side of the trade can't immediately go to the market to close out the risk as they often prefer to do.

In this case the jump is actually is large but not that large (~4%). Note this trade price is near the close price on the day before.

The system I use shows a trade that evening for 5 shares near the price on the graph. If you called me after I was done with work and tried to buy 5 shares I'd quote you a bad price too.

  • I should note I can't be sure that the 5 share trade was a buy but I would guess it was from the price. – rhaskett Dec 4 '14 at 20:13

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