Question

You are a client-focused trader (market-maker) at a large US investment bank assigned to trade the highly-liquid stocks of large technology companies. Your bank’s research analyst has just publicly released a report expressing her view that Facebook stock is likely to go up 30% over the next year. Based on your experience, you think it’s likely the stock will be up 10-15% within a few months.
a. Should you buy $500 million worth of the shares through the exchange today, with a view that you can sell them in a few months and make a $50-75 million profit?
b. How can you work productively with your salestrader partners to capitalize on any opportunities around this research report?

Answer 1

A. As per the report relased by the bank's research analyst and also as per trader's experience, it is most probable that stocks of Facebook will definetely raise. The question remains as to whether the expected raise will provide sufficient cause for the trader to invest in them. As per trader's experience, Facebook stocks will give a return of 10-15% in the next few months which is good return. Unless, there are other opportunities available in the market that can give higher returns in a shorter period, it is advisable to buy stocks of Facebook. Therefore, Action to buy Stocks of Faceboook worth $500 million should be taken.

B. In order to ensure higher returns from Facebook stocks, it is necessary that trader works in a coordinated manner with other salestrader partners considering the data from the research report. This can be done in the following ways:

1. Ensuring that report issued by analyst is based on correct and relevant data, thus verifying the accuracy and reliability of the report.

2.Continuous monitoring of share prices of Facbook and keeping each other well informed regarding the same.

3. Keeping in track all major investments being done by Bank and other salestrader partners in Facebook stocks and other related securities.

4. Keeping a track of such non-fiscal operations of Facebook as well, that might affect the shares of Facebook drastically.