The "OTC Stitch" - explained
The reason your OTC "stitch" (.0001 to .0002) doesn't work is because what you are seeing is simply the MM's algo with a Bid at .0001 for anyone who will sell, with the MMs Ask at .0002
This can go on for months, years for some. MMs and accumulators will take all they can get at .0001 (why not?), to go for the "100% score" you're talking about. It's only when the MM can get some under .0001 that they will sell at .0001 (I've been partially filled at .00005, so it does occur, extremely rare). Otherwise, you're looking for a moment when a random seller gets bored and sells, at a moment the MM doesn't need more shares.
You model doesn't work because you need a Bid of .0002 to flip your 0001s, but that's where the MM will usually sell in his 0001s, on light volume. In the micros, you always need a +0001 over your C.B. on the Bid, but the "price" showing is usually the Ask, will always show you a false high gain of +0001, since showing you the Ask as the "price," shows you a "fake profit" which you can't take because it doesn't actually exist, as there's no Bid to give you that gain.
Showing the Ask as the "price" is simply a sales trick the MMs use to get buyers to sell to.
OTCs are usually run by junior brokers at the MM. These guys are called DMMs (designated market makers), they used to be called "Specialists." Each is assigned to oversee a group of (50-70) specific tickers. In OTCs, they are "Semi-Automated DMMs." The DMM will leave the ticker on the automated algorithm you see about 90% of the time (never 100%).
The other 10% of the time, they trade the ticker and fill orders manually. These are the days when you see a particular OTC jump up multiple ticks, usually 3-5 tickers on any given day. They often coordinate with other MMs who work the same stock, the plan which 3-5 tickers will be worked that week, so the spread risk and everyone makes on the rise.
The MM has buys up on light volume to jump the price, then puts in a floor up high to prevent the drop, until he sells off his cheap bottom shares, then takes the floor out and lets it head south again, usually with a large initial drop, then after it falls, he'll put back the "+0001, -0001" stitching Bid / Ask on the descending line, re-engaging the automated algo, which will then keeps stepping down as he flips with the algo back in place.
In OTCs, there are "pure 0001s" and "pure 0002s." Some 1's you can get, some you can never get at 1, only at 2 (pure 0002s). Pure 0002s will always get worked up and down with greater regularity. Pure 0001s often have massive pumps, after long extended flatline periods of 6 months or more. Buying any OTC at 0003 and up is generally "chasing," increased risk, but if positions are small, you can certainly find flips to play.
Hope this helps clarify your issue. Anyone who has any follow-up questions, I'd be happy to answer and go into greater depth, but this is the game. Understand it, it won't be so frustrating.
Happy trades!
The reason your OTC "stitch" (.0001 to .0002) doesn't work is because what you are seeing is simply the MM's algo with a Bid at .0001 for anyone who will sell, with the MMs Ask at .0002
This can go on for months, years for some. MMs and accumulators will take all they can get at .0001 (why not?), to go for the "100% score" you're talking about. It's only when the MM can get some under .0001 that they will sell at .0001 (I've been partially filled at .00005, so it does occur, extremely rare). Otherwise, you're looking for a moment when a random seller gets bored and sells, at a moment the MM doesn't need more shares.
You model doesn't work because you need a Bid of .0002 to flip your 0001s, but that's where the MM will usually sell in his 0001s, on light volume. In the micros, you always need a +0001 over your C.B. on the Bid, but the "price" showing is usually the Ask, will always show you a false high gain of +0001, since showing you the Ask as the "price," shows you a "fake profit" which you can't take because it doesn't actually exist, as there's no Bid to give you that gain.
Showing the Ask as the "price" is simply a sales trick the MMs use to get buyers to sell to.
OTCs are usually run by junior brokers at the MM. These guys are called DMMs (designated market makers), they used to be called "Specialists." Each is assigned to oversee a group of (50-70) specific tickers. In OTCs, they are "Semi-Automated DMMs." The DMM will leave the ticker on the automated algorithm you see about 90% of the time (never 100%).
The other 10% of the time, they trade the ticker and fill orders manually. These are the days when you see a particular OTC jump up multiple ticks, usually 3-5 tickers on any given day. They often coordinate with other MMs who work the same stock, the plan which 3-5 tickers will be worked that week, so the spread risk and everyone makes on the rise.
The MM has buys up on light volume to jump the price, then puts in a floor up high to prevent the drop, until he sells off his cheap bottom shares, then takes the floor out and lets it head south again, usually with a large initial drop, then after it falls, he'll put back the "+0001, -0001" stitching Bid / Ask on the descending line, re-engaging the automated algo, which will then keeps stepping down as he flips with the algo back in place.
In OTCs, there are "pure 0001s" and "pure 0002s." Some 1's you can get, some you can never get at 1, only at 2 (pure 0002s). Pure 0002s will always get worked up and down with greater regularity. Pure 0001s often have massive pumps, after long extended flatline periods of 6 months or more. Buying any OTC at 0003 and up is generally "chasing," increased risk, but if positions are small, you can certainly find flips to play.
Hope this helps clarify your issue. Anyone who has any follow-up questions, I'd be happy to answer and go into greater depth, but this is the game. Understand it, it won't be so frustrating.
Happy trades!
