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If a trader developed a series of algorithms and bots to help her profit from predictable price trends, then which of the following algorithms would I have resulted in the highest profit? (Note: Assume there were no transaction costs associated with the transactions and that purchase and sell orders occur immediately.) If the price of Humphry Incorpora

If a trader developed a series of algorithms and bots to help her profit from predictable price trends, then which of the following algorithms would I have resulted in the highest profit? (Note: Assume there were no transaction costs associated with the transactions and that purchase and sell orders occur immediately.) If the price of Humphry Incorpora

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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If a trader developed a series of algorithms and bots to help her profit from predictable price trends, then which of the following algorithms would have resulted in the highest profit? (Note: Assume there were no transaction costs associated with the transactions and that purchase and sell orders occur immediately.) If the price of Humphry Incorporated's stock decreases by exactly $1 in 15 minutes, take the short position on 1,500 shares. Then, if the stock price decreases below $2, offset the short position. If the price of Humphry Incorporated's stock decreases by exactly $2 in 15 minutes, submit an order to purchase 3,000 shares. Then, if the stock price increases at all in any given 15-minute interval, submit an order to sell 3,000 shares. If the price of Humphry Incorporated's stock increases by exactly $1 in 15 minutes, submit an order to purchase 1,000 shares. Then, if the stock price increases above $8, submit an order to sell 1,000 shares. If the price of Humphry Incorporated's stock increases by exactly $1 in 15 minutes, submit an order to purchase 6,000 shares. Then, if the stock price increases above $7.25, submit an order to sell 6,000 shares.
Transcribed Image Text:If a trader developed a series of algorithms and bots to help her profit from predictable price trends, then which of the following algorithms would have resulted in the highest profit? (Note: Assume there were no transaction costs associated with the transactions and that purchase and sell orders occur immediately.) If the price of Humphry Incorporated's stock decreases by exactly $1 in 15 minutes, take the short position on 1,500 shares. Then, if the stock price decreases below $2, offset the short position. If the price of Humphry Incorporated's stock decreases by exactly $2 in 15 minutes, submit an order to purchase 3,000 shares. Then, if the stock price increases at all in any given 15-minute interval, submit an order to sell 3,000 shares. If the price of Humphry Incorporated's stock increases by exactly $1 in 15 minutes, submit an order to purchase 1,000 shares. Then, if the stock price increases above $8, submit an order to sell 1,000 shares. If the price of Humphry Incorporated's stock increases by exactly $1 in 15 minutes, submit an order to purchase 6,000 shares. Then, if the stock price increases above $7.25, submit an order to sell 6,000 shares.
Consider the following graph, which shows Humphry Incorporated's extremely volatile stock trend from 1 PM to 4 PM on a Tuesday. Each point on the graph represents a 15-minute time interval and the price the stock was tracked to be at that interval. 10 3 2 1 Humphry Incorporated's Daily Stock Trend гл w 2 TIME (Hour in the day)
Transcribed Image Text:Consider the following graph, which shows Humphry Incorporated's extremely volatile stock trend from 1 PM to 4 PM on a Tuesday. Each point on the graph represents a 15-minute time interval and the price the stock was tracked to be at that interval. 10 3 2 1 Humphry Incorporated's Daily Stock Trend гл w 2 TIME (Hour in the day)
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