It seems that wine isn’t the only field that casts a wider net in search of nomenclature. Yesterday’s cataclysmic sell-off on Wall Street saw major indexes dropping five percentage points in a matter of minutes. What triggered the panic- (or computer-driven) selling has not yet been conclusively established.
One of the causes that’s been mooted is that of a fat-fingered trader. No-one is suggesting that American obesity has achieved new heights (or is that girths?); merely that someone punched the wrong keys when placing a sell order. I can understand this happening to someone using their Blackberry to make an online trade while on the move, but the buttons on a computer keyboard require rather fat fingers.
Whatever the causes, it certainly counted as a Black Swan event. This term, brought into popular use by Nassim Nicholas Taleb, is used to describe an event that is “outside the realm of regular expectations” and which furthermore has an “extreme impact”. Part of his trading strategy involves buying low-cost options that fall outside normal trading ranges. If the market behaves itself he slowly bleeds capital, as these options expire worthless. However, major moves – such as the one that happened at around 2.47 pm (New York time) yesterday – are his bread and butter. His low-cost, out-of-the-money options suddenly explode in value.
That’s when he makes his money. Assuming his fingers do the right thing, of course!