There are numerous signals, indicators, and news catalysts you can pay attention to when it comes to day trading. Some are based on the news, others are based on financial data, and some are based on what other traders are doing, including block trades.
Block trades are large buy or sell orders that are typically a sign of what an institution is doing to their portfolio, and can give you an idea of what stocks to keep your eye on, and maybe even trade yourself. So, how can you transform your stock trading exploits with these orders?
What are Block Trades?
Block trades are large buy or sell orders that are typically an indication of what an institution is doing to their portfolio. When hedge funds or institutional investors want to buy or sell large amounts of a security, they will do so with block trading.
Block trades technically include trades of at least 10,000 shares, but typically involve more. They can also include $200,000 in bonds.
The reason hedge funds and institutional investors use block trades is to avoid creating volatility in the volume and value. Often, those looking to block trade use an intermediary to assist instead of simply opening a traditional brokerage account.
With block trades, a blockhouse typically handles the trades. Blockhouses operate like any other brokerage firm, however, their clients are not individual investors. Instead, they handle institutions like corporations, banks, and insurance firms. Blockhouses specialize in handling large trades outside the open markets and help minimize volatility in the market.
To do this, they may break up the large order into smaller orders. Therefore, you’re not always making one massive stock trade. Additionally, blockhouses can negotiate a price for the buyer and seller.
Why Should Retail Traders Care About Block Trades?
Block trades can give you an idea of what might those managing large sums of money think about the stock. While this isn’t the only word on what Wall Street thinks about these assets, you get an idea of how the price is shifting.
Everyday retail traders can’t always know why a block trade is made, but it can give you an idea of a ticker to keep your eyes on. You might notice patterns tied to block trades and the bear or bull market. Some people might notice that one stock exchange or another is performing differently depending on the asset types, the size of these share sales, etc.
Are Block Trades Good or Bad?
There isn’t necessarily a right or wrong answer to this. A block transaction is just that—a transaction. They’re not angels or devils. From a market standpoint, since block trades happen outside the open market, once traders see that a bunch of shares are now up for sale all at once, this could bring about negative sentiment towards that underlying stock. So, a block transaction could turn out to be negative based on the perception of that transaction.
From a retail trader standpoint, block trades can be a way to gauge interest in a stock. Although it’s hard to determine whether that trade will perform positively or negatively, either way, attention is being brought to the name of that company. You can use block trades along with other indicators as a way to determine if this is a trade you want to get in on.
How to Find Block Trades
Benzinga Pro makes it easy to find these large trades with the Signals tool to get alerts based on trading activity. All you have to do is pull up the Signals tool and make sure the block trades Signal is checked. Here, you can easily see the time, ticker, description of the block trade.
The block trade description will be something like this:
Block Trade: TICKER # OF SHARES @ PRICE
For example, at 11:04 a.m. EST on February 27th, Benzinga Pro detected the following block trade:
Block Trade: CZR 1.3M @ 12.81 at the ask
Some Signals will show at the ask, above the ask, below the bid, or at the bid. Above or at the ask shows that the investor or trader is bullish, while below or at the bid indicates a bearish move. Knowing the block size and these factors makes it easier to make wise decisions.
If the alert doesn’t mention the ask or bid, you can start watching it right away with the chart to try and guess if it was a bullish or bearish move. This might be a good time to look into the block size and decide how this
Uncover a New Block Transaction Today
Block trades are very large orders that are typically made by hedge funds or institutional investors. They are done to avoid creating market volatility, and blockhouses help investors make the trade. For the retail trader, keeping an eye on these large trades can help you see what an institution may be feeling toward a particular stock in their portfolio.
Go Deeper:
Disclaimer: Benzinga is a news organization and does not provide financial advice and does not issue stock recommendations or offers to buy stock or sell any security. Benzinga Pro is for informational purposes and should not be viewed as recommendations. Benzinga Pro will never tell you whether to buy or sell a stock. It will only inform your trading decisions. You can find our full disclaimer located here.