Was this called Painting the Tape? Also, maybe it's late and I 'm brain dead, but if, say, there is only an OTM put option, let's say 1.50 and no bid. And I were to IM Rosy and say I want to sell her a put at 1.40, and she agrees. What does she gain? She'll be long a put and presumably hedging with a long stock, no? I would be happy to have her do this when ever I am missing a bid on a quote.
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Futures options liquidity issues
- Thread starter nravo
- Start date
It has nothing to do with what she gains or what you gain. For all CBOT/CME knows, you and Rosy have a side agreement where you will incur no losses on options sold to her in an effort to drive down volatility.Quote from nravo:
And I were to IM Rosy and say I want to sell her a put at 1.40, and she agrees. What does she gain?
I'm not saying Rosy is a great threat to mankind, only that by communicating with her before a trade, you and she are violating exchange rules. Follow the rule or not, it's up to you.
In any case, the rules aren't all that limiting. I'm not a lawyer, but I see nothing wrong with IM-ing Rosy one of two things:
1) "I want to sell a XYZ nn put", and let her post a fair bid on Globex/eCbot. You either hit it or not.
2) You post an offer on Globex, and IM her, "I'm selling an XYZ nn put". She can either hit it, or make a counter bid.
Negotiating a price beforehand is not legal, nor is asking Rosy if she would buy if you were to offer at a certain price. A simple, legal, transaction would seem to be: You post an offer, she posts a counter-bid. You hit it or not. As long as you do all of the price matching ON the exchange rather than as an aside, you're fine.
I hear you and play things squeaky clean; I'm just not seeing a whole lot in it for Rosy.
Quote from FullyArticulate:
It has nothing to do with what she gains or what you gain. For all CBOT/CME knows, you and Rosy have a side agreement where you will incur no losses on options sold to her in an effort to drive down volatility.
I'm not saying Rosy is a great threat to mankind, only that by communicating with her before a trade, you and she are violating exchange rules. Follow the rule or not, it's up to you.
In any case, the rules aren't all that limiting. I'm not a lawyer, but I see nothing wrong with IM-ing Rosy one of two things:
1) "I want to sell a XYZ nn put", and let her post a fair bid on Globex/eCbot. You either hit it or not.
2) You post an offer on Globex, and IM her, "I'm selling an XYZ nn put". She can either hit it, or make a counter bid.
Negotiating a price beforehand is not legal, nor is asking Rosy if she would buy if you were to offer at a certain price. A simple, legal, transaction would seem to be: You post an offer, she posts a counter-bid. You hit it or not. As long as you do all of the price matching ON the exchange rather than as an aside, you're fine.
Isn't the problem of using non bona fide mm's that of enforcing a contract, ie if it goes the wrong way (for either side) resulting in a loss and one side walks away, what recourse is there beyond civil (or criminal?) proceedings?
Further, if one of the parties lacks the financial resources to fulfill their side of a bargain, it descends to a lose-lose situation.
There are enough authorised dodgy operators, and we don't want to compound the problem.
We need protection from the laissez-faire now and again.
Grant.
Further, if one of the parties lacks the financial resources to fulfill their side of a bargain, it descends to a lose-lose situation.
There are enough authorised dodgy operators, and we don't want to compound the problem.
We need protection from the laissez-faire now and again.
Grant.
Quote from FullyArticulate:
In any case, the rules aren't all that limiting. I'm not a lawyer, but I see nothing wrong with IM-ing Rosy one of two things:
1) "I want to sell a XYZ nn put", and let her post a fair bid on Globex/eCbot. You either hit it or not.
2) You post an offer on Globex, and IM her, "I'm selling an XYZ nn put". She can either hit it, or make a counter bid.
this is exactly what i would do. We would *not* negotiate a price but rather beat a price or post a quote for an option.
My gain would be buying the bid and selling the offer. If you want to sell a put that currently has no bid then I would post a bid (not necassarily a good one and definately not to your advantage)
Quote from Grant:
Isn't the problem of using non bona fide mm's that of enforcing a contract, ie if it goes the wrong way (for either side) resulting in a loss and one side walks away, what recourse is there beyond civil (or criminal?) proceedings?
thats true for OTC products that are not cleared with a third party. Everything I proposed is exchange cleared and no one can walk away.
Rosy,
Therefore, can I assume you are a ""bona fide" mm?
It's not apparent from the posts. Speculation on this thread would be non-existent and the thread would be reduced by 50%.
Right or wrong, posters are judged by perception - and misconceptions - rather than reality. However, ambiguities can't be avoided as long as they are perpetuated or lack clarity.
It's shameful, but I'm guilty of the above.
Don't hide you light under a bushel (if that's the correct term).
Grant.
Therefore, can I assume you are a ""bona fide" mm?
It's not apparent from the posts. Speculation on this thread would be non-existent and the thread would be reduced by 50%.
Right or wrong, posters are judged by perception - and misconceptions - rather than reality. However, ambiguities can't be avoided as long as they are perpetuated or lack clarity.
It's shameful, but I'm guilty of the above.
Don't hide you light under a bushel (if that's the correct term).
Grant.
Quote from Grant:
Rosy,
Therefore, can I assume you are a ""bona fide" mm?
no, I am no a marketmaker and have no exchange membership. I have a retail account. did you read the posts? I do not know what is so hard to comprehend here.
if you want a bid or offer for an exchange traded security, I would be willing to post it through my account then you would see it on your screen and hit it or not. I cannot make this any clearer.
LOL. Ok, Now I get it. You would create the other side of the trade -- at your price, not mine. Well, shit, I would do that, too! Your basically doing (answering) a RFQ, right? I'll keep you in mind if I wanna get hosed -- just joking.
Quote from rosy2:
this is exactly what i would do. We would *not* negotiate a price but rather beat a price or post a quote for an option.
My gain would be buying the bid and selling the offer. If you want to sell a put that currently has no bid then I would post a bid (not necassarily a good one and definately not to your advantage)