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Ageed. I explained a little bit about why this might happen in my last post. This is why I would say that the 1 penny wide market is, in fact, an illusion. This is also why the HFT companies can not be considered liquidity providers, rather they are liquidity eliminators. Even a small order...

Well, I explained that in my last post, but I can give you an example. Consider the Getco dark pool business model. Getco convinces Chicago trading companies to route stock and options orders into their ping destination dark pool, where Getco is always providing two sided liquidity on every...

True. Though, you are making a case for market makers, rather than HFT's. Did any of you take debate class in hi school? Remember how it was important to agree upon term definitions at the beginning? Market making and HFT strategies have become like concentric circles in the stock...

I do disagree with at least some of propseeker's opinions. However, he knows a lot about market structure, and supports his opinions. Therefore I find value in reading his posts. Please don't lower the conversation into namecalling. That helps no one.

You knowledge base is obviously in the stock world, whereas mine is moreso in the options world. I am by no means trying to present myself as a HFT expert. hft is just that: high frequency trading, ie trading a lot of times with computers. the BULK of high frequency trading is automated...

It seems I was not that clear. I do blame the regulators and resulting market structure. I was also very clear that HFT companies are not breaking any laws. I just disagree with the laws.

This is a strange bet. If the calls were a bit meatier, I would suggest that it was a hedged (delta neutral) and a bearish market bet. This doesn't really make sense with .15 calls though. Since we're throwing out theories, I would guess that this trade is an upside hedge against a huge...

Ad hominem isn't a "big word", and as you already stated it is used colloquially in a slightly more inclusive manner than its exact definition. This is true with many words, not just "big words". This fact of communication only bothers the mental bullies, who desperately try to show they are...

I don't think this is accurate at all. To better undersatnd your perspective, at what exchange were/are you a pit trader? I traded options, mostly at the CBOE and a bit at the CME/CBOT. There were undoubedly some horrendous business practices on a day to day basis in the pits. Some of...

Funny how it's always the ad hominem jerk who makes the most uniformed statements. This is true for exchanges, but not dark pools. Dark pools use all sorts of different flash messages. The exact details vary. Sometimes they will give a price and a buy/sell indication, allowing the firm to...

Well, the author called this situation very accurately. I fear that Thursday's events were somewhat contained compared to what might happen in a real crash. Imagine every stock's market quoted .01 @ 100. The only thing we can do is try to prepare to profit from the coming fallout. A typical...

From everything I have read this situation seems pretty clear. Hi frequency trading has decimated the market making companies. HFT companies do not provide any actual liquidity. They immediately flip in and out of their positions without ever holding onto anything. They also play very similar...

If we are only discussing equity options, traders will also exercise their 100 delta puts for cost of carry purposes.

That would be a logistical nightmare, since every trade has a counterparty. The clearly erroneous guidlines are posted in every exchanges bylaws, but in practice are not formulaic. They are judgment calls. The 60% up/down that the exchanges collectively agreed to was by far the widest spread...

The VIX cash price is calculated using a weighted average from the first two normal SPX expirations, so as to estimate the 30 day SPX implied volatility. The VIX futures therefore are based off of vols from a specific place in the SPX vol curves (VIX futures expiration date plus 30 days)...

I read your long winded post. It shows a basic knowledge of options, combined with a lot of confusion and innaccuracies. This statement, where YOU state your conclusion to your rambling post regarding the OP and his SPY spread, is WRONG.

Sure thing. And if you don't know anything about the limitations of trading put spreads in a retail cash account, how can you say those limitations don't create grave risks? Well, for starters, I did say "barring retail account issues." Even there though, a long stock/long 100 delta...

Not true. I can't say what the implications of trading a retail cash accout are, since I've always traded as a market maker. However, barring the retail cash account issues, if you are long an SPY put spread, the only risk you would have from exercise of an ITM p would be carry risk. Carrying...

Negative stock carry rates due to hard to borrow IS the carry rate that the others keep referring to. There is quite a bit of "carry" risk in trading equity options. Options traders don't typically measure extrinsic value from the underlying stock, but rather from the forward value of the...

This would only be true if the options are cash settled. Since SPY expires into the underlying ETF, the only difference in the P/L for an assigned put (or long stock) vs short put would carrying costs.