Beating The Gun

  

An early 1950s film noir, in which a hard-bitten L.A. cop, played by an aging Humprey Bogart, investigates the death of an Olympic sprinter, who is killed when someone replaces a starter pistol with a real gun.

Okay...actually, its slang term used when a trader is able to properly time the market.

You own stock in a company that most people have never heard of, but which has a big contract to provide plastic cup holders for a large car manufacturer. News breaks that the auto maker had terrible sales for most recent quarter. You immediately know that the price of your shares will eventually tank, since bad sales for the automaker means bad sales for the cup holder company. You quickly sell your shares before most of the rest of the market figures out the connection between the two companies. You just beat the gun.

There's a distinction here between beating the gun and insider trading. Insider trading is making moves before the general market because you are illegally using non-public information. Beating the gun is just timing the market well by quickly reacting to events.

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Finance: What is a Block Trade?22 Views

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Finance a la shmoop.. what is a block trade? yeah you think this was the yellow Marvin [A monopoly board]

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Gardens trio bartered for the green Pennsylvania Avenue set but it's not

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instead a block trade happens when a huge, you know block yes clever naming

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there of shares needs to get sold think company founder just got divorced and [Man and woman sitting on a sofa]

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old husband wants the dough fast she just wants to get rid of him you know

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lose 185 pounds so of her 28 million shares she or rather her bank or brokers

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put together a group of a half a dozen buyers who then buy the stock in a clean [Stock is dusted]

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block trade there's a strange paradigm here sometimes companies shares are

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thinly traded or not liquid meaning that there isn't a ton of volume every day in

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the stock and large institutions wanna buy in big like to the tune of 5 million [Big institutions buy stock]

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shares but if they buy 50,000 shares a day in the market well they'll likely

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move the stock from say 18 bucks a share to 25 bucks a share by the time they're

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done buying so sometimes supply of block trades is constrained and the trade

01:12

usually with price negotiated well beforehand goes off at a premium to

01:17

where it was regularly trading like that eighteen dollar figure maybe implies a

01:22

block trade that happens at 20 bucks the seller is usually happy because if they

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dump the shares at fifty thousand a day into the market while they'd likely [Dump truck dumps stocks on the floor]

01:31

drive down the stock price to fifteen dollars or less in the process got it?

01:35

and this way they got a $2 premium above that 18 bucks 20 minus eighteen two

01:40

dollars there yeah and the institution is happy because now they own the [Institution smiling]

01:44

however many millions of shares that they own at a twenty dollar base price

01:49

instead of something likely much higher if they've gone into the market and

01:52

bought em, so that's when supply is constrained in a thinly traded low

01:56

volume in demand stock much more common as a block trade where there's a whole

02:00

lot of supply coming on board and not nearly the demand of buyers or investors

02:05

to take over the stock so it trades at a meaningful discount to whatever price it

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was trading at like in the eighteen dollar a share case well maybe that

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thereabout so that's a block trade and here's a blockhead yeah ask your parents [Blockhead figure appears]

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if you don't get the reference here...

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