It was a rough week for the exchanges as the three-hour halt in Nasdaq trading on Thursday was unprecedented. There was no comment from the Nasdaq until well after the close. On Friday, their response also seemed to be lacking, looks like they must be using the same damage control experts as Carnival Cruise.
Even more disturbing from my perspective was the glitch in Goldman Sachs (GS) options software on Tuesday that mis-priced over 800,000 options at $1 each. If the regulatory authorities decide to bust these trades and protect Goldman, I feel it will be very discouraging to the individual investor.
I agree with Myron Scholes, co-creator of the Black-Scholes option pricing formula, who told the Financial Times that Goldman should pay for their mistake.
The actions of the big institutional traders and research departments can often provide some useful insight. Sometimes, but not always, it is a good idea to do the opposite of what they are doing or recommending.
Should you be doing the opposite of what they are recommending?
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