How much would you need to invest to make the Dow go up by one point?

Factual Questions
1

I’ve thought of a fantastic, can’t-fail money making scheme.

All you do is place a bet that the Dow Jones will go up by x points and then you invest whatever amount of money is required to make the Dow go up by that many points. Then you withdraw the profit you made from the bet plus the money you invested. Simple.

So I just wondered how much you need to put in to make the Dow go up. Also is this plan legal?

2

Any plan that starts with you betting on something you have zero understanding of can definitely be defined as “simple.”

The Dow is an index of 30 stocks. It’s calculated by taking each dollar rise or fall in any of the individual stocks and applying what’s called the Dow Divisor.

So all you have to do with your simple plan is get a certain stock to rise by your chosen amount as calculated with the Divisor. … And then bribe everybody else in [del]America[/del] the world not to buy any stocks in those 30 major companies for the day.

Seems to me you’ll come out behind on that.

3

Not sure why I wouldn’t want anyone else to buy stocks. They can buy stocks if they want - I would just have one of those bets that depend on the Dow rising. But I would make sure it rises by investing whatever is required to do that.

But looking at the divisor formula, it seems I need to invest a certain amount in each of those 30 companies. I’m guessing quite a large amount to make the share price of the likes of Boeing go up. But I get that money back by selling once I’ve made my profit.

I was wondering about the legality because it’s a bit like insider dealing but not quite. I do have inside knowledge that the stocks are going to rise but only because I myself am going to make them rise.

4

I don’t think you can count on a fixed number, either of stocks to buy or dollars to spend. There are others selling as you are buying.

If you have enough money to turn a large panic selling spree into a market rise, then you don’t need a get rich scheme. You are already there and beyond.

5

I guess. I always thought we were talking about about figures in the billions to affect the Dow.

But if it’s just 1 bill that’s required to boost the Dow. And you put on a 1 bill bet a couple of minutes before. And that 2 bill is all the money you’ve got then maybe you could turn that 2 bill into 3 bill or more in one clever move.

(not that I’ve got any bills - it’s all theoretical, of course)

6

With whom are you making this bet? Because no casino will give that kind of action, and if you are betting that kind of money with a bookie, he’s better connected than you are and you will lose.

7

It’s possible, but it’s not a sure bet. If you want to guarantee it rises, you have to have enough money available to offset any losses that are happening as a result of actions by others. That’s where the megabucks come in, and I honestly don’t know how much it would take – but I’ll bet you a billion trillion dollars that I don’t have against the billion you don’t have that one billion that neither of us have isn’t enough if you pick a bad time to make your bet.

8

You’d make the bet with brokerage firms like Charles Schwab - maybe spread it around a few brokerage firms.

Yeah you’d have to pick a stable time to do it. You wouldn’t do it now for example.

9

Just a guess, but a brokerage firm would possibly have legal obligations to their clients not to make side bets against them.

Even if they don’t, you’d be spreading knowledge about the fact the bet exists, and even worse, it’s timing. You’d have other investors jumping in betting against you, or making up their own bets against each other, and the market would be anything BUT stable.

No, you’d have to make a bet privately far away from the market. With maybe a Saudi prince, or a Mafia don. But I hear guys like that don’t like to lose. :stuck_out_tongue:

Come to think of it, it might be safer to bet the market will go down. All you’d have to do to win is something like crash an airliner into a high rise in Manhattan. Piece of cake, comparatively.

10

This page shows what the stocks in the DJIA did yesterday. Note that the volume of shares traded ran from 8.5 million shares of 3M to 550 million shares of Bank of America. To get 3M’s price to rise, you’d have to buy a significant number of shares (2m? 4m?) at above the asking price to make it’s closing price rise for the day. Let’s say you could do it by offering $1 over the price for 2 million shares. That would cost you $167 million. And that’s just one stock. If you bought every stock at $0.50 over the asking price, and you had to buy at 25% of volume for the day… you’d have to spend $12 trillion.

That doesn’t even take into account the physical difficulty of buying that much stock (440 million shares) in a single day, even using multiple brokers. And it also doesn’t take into account the regulatory issues you’ll have buying that many stocks.

And once you’ve bought your $12 trillion worth of stocks, you’re gambling whether or not you can sell them back for the same price. Odds are no, at least not the next day. And after you account for fees, you actually need them all to go up just to break even.’

If you do nothing, it’s a 50-50 bet.

11

I’m curious as to why you chose buying 25% of the volume for the day. Wouldn’t you need to buy more than 50% to “guarantee” the index rises?

12

I don’t know the answer … but know that several answers given thus far are wrong. :smiley:

  1. The sort of bet OP wants does not require a special bookie; it can be fashioned with ordinary options.
  2. Assuming OP wants to bet the DJIA goes up exactly 10 points (or rather anywhere from +9.5 to +10.5 ?), a big question is: Where is the DJIA near end-of-day when you’re ready to make your move? If it’s, say, +8 and you only to move it 1.5 points, that’s probably easily doable, at least by a billionaire. If the DJIA is at -200 (or +200), you have a much bigger problem.
  3. You only need move one of the 30 stocks, at least to move the DJIA a little. Given the peculiarity of DJIA’s weight-by-price, you’d attack a high-price, relatively low-volume stock, e.g. MMM.
  4. MMM was up 50 cents yesterday on volume of 8.5 million shares. If there had been an order to buy 2 million shares half-an-hour before close, what would the likely effect on the the share price be? I don’t know; there may be anecdotes that give an idea, but specific circumstances will make it unpredictable. Still, you need only get to the ball-park and you can fine-tune the DJIA in the minutes before close, at least if you have enough megadollars.
  5. A big problem with this plan is that you will be buying MMM High, and selling it, the next day, Low. This isn’t profitable. Moreover, if you trade enough derivatives to make your “bet” profitable, you will be playing Buy High-Sell Low with those derivatives also.
  6. A better plan (although I hope Mods will censor this if discussing criminal activity is against Board rules) would be to pull a H.G. Wells and stage a Martian invasion, or some such, shortly before the closing bell. Or, since computer glitches have caused huge price swings, bribe a trader at a Wall St. desk to accidentally add a few extra zeros to an ordinary MMM order.

Good luck!

13

No, because you’re not interested in the average price, just the price at close. In theory you could accomplish what the OP suggests by making massive purchases in the last hour the market is open. But this presumes that there will be enough sellers, which may not be the case.

My presumption was that you would make sufficient purchases in the afternoon to help drive the price up, and 25% was a WAG, based on the idea that you’d be trying to corner the market in the last 25% of the trading day.

A better plan is to do nothing. That gives you 50-50 odds without having to give away trillions of dollars.

14

To the contrary, you’re hoping there are no eager counterparties to the trade, so that you can force a large price movement with small investment.

The idea that no counterparties would be available at any price for a major stock like any of the DJIA 30 is counterfactual, unless the Exchange actually suspends trading. (Certain days in October 1929 may be exceptions.)

15

Isn’t this what the old stock pools used to do in the 1920s? Admittedly they would target only a few stocks but the basic technique was the same. You can see a good description of how they worked in Edwin Lefevre’s Reminiscences of a stock operator here. ANd also in THomas and Morgan-Witt’s Social History of the Wall Street crash (AMazon page (a fantastic book by the way).

Essentially you’re proposing a form of market manipulation which has been outlawed since the 1930s.

16

If you plan your scam for a tuesday, and start early, the DOW could loose thirty points as you buy into it. Now you spent your billion, and the stock market is only down 29. Now Bruno wants his Billion.

Tris