Bagging the Street Definition
“Bagging the Street” is a technique that investors use in investment market to pursue profits from investment changes (such as changes in price) that occur before the execution of large-volume trades. When investors notice that a large block trade is about to take place and it will lead to changes in the price of a stock, bagging the street strategy can be used to pursue profit.
A Little More on What is Bagging the Street
Typically, a large block trade influence significant price changes in the stock market. An investor or trader who wants to benefit from bagging street would buy or sell a stock at its current price before the execution of large block trades, such as investor would thereafter benefit from the changes in price upon the execution of the trade.
Some investors or companies regard bagging the street as an unfair strategy that investors use to benefit from changes in market prices, but many investors use this strategy regardless of this opinion. However, it is important to know that bagging the street cannot happen without the occurrence of a block trade.
Example of Bagging the Street
Below is an illustration of bagging the street as used by traders;
If a large-volume trade r block trade is about to happen in a market, let’s say an institution wants to purchase over 60, 000 shares owned by Company X. If the institution places the block trade order with a broker and the broker fills the order, the institution cannot execute this block trade without acquiring a huge number of shares from multiple investors in the market, this will in turn increase the demand for the shares that Company X owns. Increase in demand translates to increase in price. Let’s say from $20 per share to $25 per share.
However, an investor that wants to take advantage of this block trade using the bagging the street method can place a small order at $20 and this will be filled more quickly than a block trade order.
Reference for “Bagging the Street”