How A Super-Cheap, Super-Volatile New Options Strategy Has Emerged To Help The Pros Cream The Little

Partly agree. Market makers who take direction bets though usually end up without job mostly because they either got fired for violating their mandates or because they have no clue about direction, a task they were never qualified to engage with in the first place.

Also market making is not as simple as being forced to take positions that end up being profitable. That's a pretty naive view. Market makers make money because above and beyond being smart and trained they see flow in the short term and the more flow crosses their eyes/algorithms the more profitable their liquidity provision.

zdreg said:
Market makers by definition are supposed to provide liquidity when the public is primarily on one side of the market. Since the public is mostly wrong market makers are forced to buy at bottoms and short at tops. Therefore they are forced into making profits. This is decades old knowledge popularized in books by Ricard Ney. Unlike the public the market makers hedge their risk exposures.

Market makers who make directional bets are eventually out of business, since they are usually high leveraged
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I may not have been as clear as I could have,but below is the sentence that I found absurd..With a bid offer spread of 5 cents on a 4000 number,unless you have equal 2 sided flow,the trade is far from riskless..

"In theory, this is a riskless trade for the bankers."
 
M.W. said:
Also market making is not as simple as being forced to take positions that end up being profitable. That's a pretty naive view. Market makers make money because above and beyond being smart and trained they see flow in the short term and the more flow crosses their eyes/algorithms the more profitable their liquidity provision.
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As long as market makers are hedged it is a profitable business over time.
 
0DTE has its uses. It is maximum leverage. I've made money on 0DTE, usually on SPY options counter directional to 1%+ gaps. I think it is less stressful to buy 1DTE options on the broad index ETFs. There is also a limit to how many 0DTE you can purchase especially at IB.
 
I can't tell ODTE vs other expirations. But I did trade thousands of SPX weekly cash settled contracts in IB over the years, vertical spreads, iron condor, butterfly, not as proftable as I expected. 1-2 bad week can take away all the premiums you had sold. The odd is not on your side.
 
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