Andreas Park PRO
Professor of Finance at UofT
Trading Case: AT1
The quick and dirty on AT1
Symbol?
What's notable about the stock?
TNX
- high volume stock
- very low volatility
- trading starts @ $25, price follows a random walk
What is your task?
- Buy 100,000 shares
- Match or be close to the daily VWAP
What is the VWAP?
- VWAP = volume-weight average price
- \(\to\) one form of finding an average price for the day
| Time | price | volume | buy/sell |
|---|---|---|---|
| 10:05 | $25.01 | 1,000 | buy |
| 12:30 | $24.95 | 500 | sell |
| 14:45 | $23.01 | 1,500 | buy |
VWAP=\frac{1000\times 25.01+500\times 24.95+ 1500\times 23.01}{1000+500+1500}=\$24.00
Example
Volume patterns
Common pattern:
U-shaped or reverse-J shape
How do you know your VWAP in RIT?
stock ticker
how much do you currently hold
how much did you pay "on average" (=your VWAP)
the day's VWAP
Evaluation guideline
-
Within 15 cents of VWAP Very Good
-
Within 20 cents of VWAP Good
-
Within 25 cents of VWAP Average
-
Within 30 cents of VWAP Needs improvement
-
More than 30 cents from VWAP Improper execution
MGT435: AT1
By Andreas Park
