AT1 VWAP Strategies

A liquid stock is bought in a large order against market makers and noise traders. The order is judged against the session VWAP.

Objective

Buy 20,000 LIQ at an average price close to the session VWAP, the volume-weighted average price. Assessed on execution against it.

What it shows

• Execution against a benchmark: the question is how well the order was worked, not whether the stock rose.
• VWAP as a target that follows the market's own volume.
• The cost of the spread and of market impact.

Watch out for

• Buying everything at once, which pays for depth and leaves the average far from the VWAP.
• Leaving too much until the end and paying for speed.
• The benchmark moving because the student's own orders are part of it.

Who takes part

• Agency Trader — every student. Buys 20,000 LIQ, working the order over the session.
• Computer traders — two market makers and four noise traders supply the other side.

Class size

Any size, from one student. The computer traders make the market; each student works their own order, and several working at once move the price for each other.