# Derivatives trading causing increase in volatility



## markrmau (17 May 2005)

The statement below is referring to Monday 15/5/5. 

"Goldman Sachs JBWere said much of the selling during the afternoon was driven by a handful of brokers competing with one another to sell physical stocks and buy futures contracts in order to take advantage of pricing differentials."

http://afr.com/premium/articles/2005/05/16/1116095905887.html

Coincidentally, I am just reading something by Bruce Jacobs who explains how the risk redistrubution mechanism used in the derivatives market causes increases in volatility. (by buying in upmoves and selling in down moves).


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## DTM (17 May 2005)

*Re: Derivitives trading causing increase in volatility*



			
				markrmau said:
			
		

> The statement below is referring to Monday 15/5/5.
> 
> "Goldman Sachs JBWere said much of the selling during the afternoon was driven by a handful of brokers competing with one another to sell physical stocks and buy futures contracts in order to take advantage of pricing differentials."
> 
> ...




There might be some credance to that claim because I've been noticing a huge pick up in options trading lately.  Today alone, 90,000 odd contracts were traded.


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