Schaeffer's Trading Floor Blog

Unique Chart Patterns, Gambling's New Foe, and Google Volatility

High-frequency trading versus Google Glass

by 5/10/2013 7:35 AM
Stocks quoted in this article:

In search of a unique chart pattern? My Twitter and trading friend @Mjlevy76 passes along this look at Neuralstem, Inc. (NYSEMKT:CUR).

One-Week Chart of Neuralstem, Inc. (CUR)
Chart courtesy of E*Trade Mobile

Yes, it trended from Wednesday to Thursday, but then had a classic Fibonacci time retracement and re-tested "Wednesday" again before solidly moving into Thursday. What?

This only proves what we've suspected for a while now. The high-frequency trading machines can now execute transactions faster than the speed of light, and ergo can actually go back in time. Colocation (so as to not lose precious nanoseconds until execution) is so yesterday's news. Expanding the bounds of the space-time continuum for trading purposes is the story of tomorrow. Or rather, the better story of yesterday, since they can go back and see the price they should bid ... never mind, my head just exploded.

Even though we humans are getting farther and farther removed from the trading/investing process, all hope is not lost. We'll all be wearing Google Glasses by 2014!

Google Glass is a wearable computer with a head-mounted display (HMD) that is being developed by Google in the Project Glass research and development project,[7] with the mission of producing a mass-market ubiquitous computer. Google Glass displays information in a smartphone-like hands-free format, that can interact with the Internet via natural language voice commands. While the frames do not currently have lenses fitted to them, Google is considering partnering with sunglass retailers such as Ray-Ban or Warby Parker, and may also open retail stores to allow customers to try on the device. The Explorer Edition cannot be used by people who wear prescription glasses, but Google has confirmed that Glass will eventually work with frames and lenses that match the wearer's prescription; the glasses will be modular and therefore possibly attachable to normal prescription glasses.

Just imagine, a trading screen in the corner of your eye! Before you go crazy looking at charts though, keep in mind that the explosive iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX) rally might actually be early onset cataracts.

Google Glasses do seem like the perfect gambling accessory, at least for games like poker and blackjack. But you're going to have to disguise them a bit:

Due to the fact that Google Glass could be taking photos or videos of someone without it being overtly obvious, we guess some establishments aren't taking too kindly to it and have banned Google Glass from being used in their establishment. Some venues in Las Vegas have also reported that they will not be allowing Google Glass into their establishment, and famed casino Caesars Palace has recently made a statement confirming that Google Glass will not be allowed to be used when gambling, which we guess was pretty obvious.

A Caesars Palace representative released the statement to The Verge, "Nevada gaming regulations (and those in other states, as well) prohibit the use of computers or recording devices when gambling. As a result, we cannot allow guests who are gambling to wear Google Glass," in which they basically stated that the reason behind the ban was to remain in accordance to Nevada state laws.

Better stick to high-frequency trading. Or just going back in time and buying and holding Google Inc (NASDAQ:GOOG) -- click chart to enlarge:

Daily Chart Google (GOOG) Since January 2013
Chart courtesy of TD Ameritrade/Thinkorswim

Even Google options are doing well. Implied volatility is about 21, which is actually pretty close to 10-day realized volatility of 19. Typically, GOOG options notoriously overprice actual volatility in GOOG stock, most likely because we often lose a little perspective with triple-digit stocks. No one's all that terrified of a $9 stock dropping $0.50, but everyone's worried about a $900 stock dropping $50.

Disclaimer: The views represented on this blog are those of the individual author only, and do not necessarily represent the views of Schaeffer's Investment Research.

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