Posted on 06/11/2021 7:07:09 AM PDT by SeekAndFind
Wall Street trading will never be the same again. This “thing” they call the meme stocks, the Reddit Army, the Robin Hood traders -- it's not a fad. It’s real. And it has only just begun to change Wall Street forever.
What happened? In the last few years, the friction that used to benefit the powerful in the system of trading stocks has been eliminated. And on top of that, social media has become widely adopted and used by bajillions of people around the world. The way this has changed things requires us to look at the way things were to understand the magnitude of this shift and what it means for the future.
Historically, you had to meet a broker and fill out a stack of paperwork and he had to get it approved by his back office, then you had to fund the account with a check, it had to clear, and then you could start trading. It could take a week or longer. You had to pay a commission on both a buy and sell. As an individual, this was a meaningful “negative” start to your trade. You were immediately behind and unprofitable.
In addition, you were required to buy a “round lot,” which was 100 shares. That was the minimum required by Wall Street. Buying 100 shares of a $25 stock was a $2500 investment and you were charged around $2650. Because of commissions, one would be down -6% immediately on the trade. In order to break even, the individual investor would have to make around +12% on that trade because another commission would be charged when you sold the stock.
Can you see how this system put the small investor at a huge disadvantage?
(Excerpt) Read more at americanthinker.com ...
I bought a few stocks in the early 90’s. I’ve never heard of the round lot and those were not round lots or close. I think that is a relic of the days before the 1980’s.
RE: I bought a few stocks in the early 90’s. I’ve never heard of the round lot and those were not round lots or close.
A larger player only had to make a fraction of a percent to pay for his commission. This is why the institutions and big investors ruled the markets and the little guy was shut out. This “hurdle” made the individual investor stay in a trade longer just to get to profit territory. So he traded less often.
He was also priced out of buying stocks such as Amazon or Nvidia which have stock prices of over $3,000 and over $700 per share.
A round lot of Nvidia would be $70,000 just for that one position! Most individuals don’t have that kind of money to trade in a single stock if they’re trying to be diversified into 10-25 stock.
But Now, we have “fractional share” ownership. Anyone can buy just a slice of Amazon with as little as $50. This fractional ownership, which only just came onto the scene in the last few years, has solved the round lot problem and made it a term we may never hear about again.
I was only addressing a particular claim and my personal experience is that though this may have been a thing at some time, it wasn’t in the early 90’s when I bought a couple of stocks.
Yep. I didn’t even bother with the market until the discount broker thing became a thing. That is what made it possible for me to bother at all.
Interesting.
oddlot trading has been around since at least the 1940s.
I was day trading in the late 1990s for $7.50 a trade - for one share or for ten thousand shares.
The only reason it was complex and time consuming to open a new brokerage account back then was because of strict "know your customer" laws that went into effect in the 1980s to stop the flow of drug money into the USA financial markets.
By the way - the timing for this post is awful!
This week, GameStop (GME), the darling of short squeeze traders everywhere, has lost one third of its value, from $342 down to $229 - as I write this.
My first stock purchase was around 1966 when I purchased 100 shares of El Paso Natural Gas for the dividend which was something like 5%. Eventually sold it because I needed the cash for my last semester tuition payment! My first options purchase was in 68, WR Grace co. Made money of the former, lost on the latter.
Applied for a job at a brokerage. Two things were made clear at the interview: One, I was expected to move stocks and generate commissions. Two, I should have a number of “customers” on hand like well healed relatives and friends. Think of Bud Fox looking to Gordon Gecco for his business. Glad I chose a different career path.
Wow, thanks for the post
Sorry - that is completely ridiculous.
In the late 1990s, not only did we have real time option quotes, we had the ENTIRE ticker for Bid & Ask + Quantity.
I could make option trades on any stock or ETF (like QQQ and SPY) for less than $10.
Please stop making up stories about things you know nothing about!
I first bought mutual funds in the 1970s. I don’t remember the startup process being that big a deal. Commissions are noise for a long term investor.
Glad it is even easier for small investors to get going.
The hardest part is setting the money aside not the process or commissions involved with investing.
....until the Big Guy gets his cut and outlaws private stock trading.
One remaining obstacle involves buying stocks in certain overseas markets, such as the Australian market. Brokerages still charge a fairly hefty fee for buying and selling in those circumstances.
I was talking about the time before there were NO quote machines, EFTs, or any of the info you note available to the public or on the NET because there WAS NO NET. If that is too complicated for you to follow, I might suggest you try learning about that era before you pontificate about what you are obviously oblivious about.
As far as options, there were not even listed except on the over the counter market until they were approved for trading by the CBOE I think around 73.
Sorry about that but I do know of what I am talking because I experienced those times, sometimes profitably, sometimes not so much.
Someone posts an article about meme trading in 2021, and you decided to write a comment about the trading environment in the 1970s?
OK.
By the way, I bought my first stock in 1962.
Holiday Inn (HIA), ten shares, at $11 a share.
I was responding to someone who had a question about how things worked before 1990. I hope that clears that up for you.
You must be older than I am by a few years, good for you. I thought I was the only dark ages trader left!
Now trading at $212 (8:40 AM PST).
Down 38% since Tuesday.
The "Army of Davids" will show up any minute now!
Bkmk
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