I’ve been noticing recently that, especially clearly in the after-market, trading bots have been buying and selling much more aggressively than I’d become used to. Assuming my perception is correct, it prompts the question why this is happening.

My conclusion is that bots have begun to probe more actively for resistance levels, trying to reach more quickly the points where either other bots or human traders will step in to absorb the selling bots are generating (or selling heavily into the buying bots are doing). If that’s correct, the effect of this new tactic will likely be to increase short-term volatility but leave the longer-term patterns of stock behavior untouched.

For you and me, this would also increase the rewards of trading, in stocks we know well, against this newest bot quirk.

What else might be going on? I have two thoughts:

–it may be that bot runners have specific profit targets in mind for themselves, which they can no longer reach without upping the risk they take on. This would be a natural result of today’s higher interest rates–raising the cost of holding a position as well as inducing a less speculative, more buy-and-hold attitude among market participants

–it could also be that there’s been some internal change in the options market. I know just enough about derivatives to be dangerous, so I have no idea what this might be. …although the first place I’d look would be the major brokers, on the thought that increasing options activity is offsetting risks that lie elsewhere on their worldwide books.