Steam Move

Steam is a line moving fast and everywhere at once. A spread sitting at −3 for two days jumps to −4.5 across every major book within minutes.

What causes it

Almost always coordinated money. A betting syndicate places large wagers at several books simultaneously, often through multiple accounts to avoid limits, and the books respond by moving, both to rebalance and because they assume the money is informed.

Once the first few books move, the rest follow. Books watch each other’s prices closely, and a market sitting still while everyone else moves is a market about to be arbitraged.

Chasing steam rarely works

The obvious idea is to follow the move: if sharp money likes one side, back it too. In practice this fails more often than it works, for three reasons.

You are late by definition. By the time the move is visible, the good price is gone. You are taking −4.5 where the syndicate took −3.

Value has a boundary. The syndicate bet because −3 was mispriced. That does not mean −4.5 is. Often the move overshoots fair value, and the late money is on the wrong side of it.

Some steam is manufactured. A syndicate can deliberately move a line at a low-limit book to trigger copying elsewhere, then take the resulting inflated price on the other side at books with real limits. This is well documented and is why respected books treat sudden moves at soft books with suspicion.

The honest use

Steam is better as information than as instruction. A market that steams and then holds its new level was genuinely mispriced. A market that steams and drifts back was probably manipulated or overreacted.

Watching which is which teaches you more about a book’s pricing than following the move ever will.