Bagging the Street

Bagging the street is a trading strategy in which a trader or traders try to profit from price changes created by large purchases of stock, called block trades. Traders who practice the bagging the street strategy rely on access to real-time trading information, which is something most everyday traders don't have.

In the case of bagging the street, a trader sees a trade get entered for a large quantity of shares of a certain stock. Aware of how the brokerage back office fills such large orders, the trader attempts to sneak in first and then ride the coattails of the block trade.

For the purposes of this discussion, Trader A sees a block order entered for 100,000 shares of ABC. Trader A assumes the trade will take some time to fill and, when it does fill, the purchase will drive the price of ABC up, at least in the short term. He or she attempts to place a trade to buy ABC at a lower price and in a smaller quantity to beat the block trade into the market in terms of execution.

After the block trade is executed, Trader A will sell ABC for a higher price due to the large share purchase. In short, Trader A used an unfair advantage, given the knowledge of the block trade if it is large enough to impact stock prices.