Bagging the Street

WHAT IS Bagging the Street?

Bagging the street is a term that alludes to an investing strategy that pursuits profit promptly prior to the execution of large-volume trades.

How Bagging the Street Works

Bagging the street is a strategy an investor might decide to utilize when they see a large block trade happen. Assuming that an investor expects a large block trade and that investor trades securities in a similar stock, the investor might endeavor to benefit from the impact the large block trade might have on the price of stock. This endeavor is called bagging the street. Some in the industry see this as an unfair advantage which can help traders who exploit data irregular characteristics. Traders who often practice bagging the street may likewise have their margin requirements revoked by a brokerage.

To bag the street a block trade must happen. Block trades involve a large volume of stocks and can affect the price of shares underlying the block, particularly in the event that those securities are illiquid. Traders who practice bagging the street endeavor to gain an advantage from the block trade assuming that influencing stock prices is sufficiently large. When the block trade completely goes through and the market rapidly absorbs the impacts, investors are free to resume their ideal trading strategies.

An Example of How an Investor Bags the Street

Since blocks are large, individual investors rarely purchase them. All things being equal, they appeal to larger institutions or funds. However there is no official size assignment, the common standard is 10,000 equity shares or a total market value of more than $200,000.

For instance, suppose Institution A needs to purchase 50,000 shares of Company A, and feels free to place that purchase order with its broker. That broker then goes to take care of the request, yet to do that they need to secure a large number of shares from different dealers, which increases the demand for Company A's shares. The increase in demand increases the price of each share and each share goes from $10 to $15 a share. A trader, wishing to capitalize on this, would see the order for the block trade go to the trade and, realizing that it will probably require a more extended investment to take care of the request, the investor would place more modest orders at the current share price of $10, as the more modest orders will be filled all the more rapidly. The trader then, at that point, pivots and sells the shares at the new price of $15 a share.

Features

• Traders who practice bagging the street endeavor to gain an advantage from a block trade on the off chance that influencing stock prices is sufficiently large.
• Bagging the street is a strategy an investor might decide to utilize when they see a large block trade happen.
• Some in the industry see this as an unfair advantage which can help traders who exploit data uneven characters.