Interesting, I had thought that when you get the Pro Customer designation when you trade over the 390 average, this would entitle you to be on both sides of the market. This is what I was told by my firm. So you are saying this is not true?
Market Makers Approach to Options Trading
- Thread starter ajacobson
- Start date
Interesting, I had thought that when you get the Pro Customer designation when you trade over the 390 average, this would entitle you to be on both sides of the market. This is what I was told by my firm. So you are saying this is not true?
Basically yes. The exchange Professional rules would allow quoting both sides, but essentially you are becoming a market maker and have market maker responsibilities. Most of the takers - I have been told - are CBOE in the VIX and/or SPX. My view of the 390 rule which qualify's you as a Pro Customer actually disadvantages you because you lose retail protections. The exchanges Pro rule will require you to be a b/d and establish a clearing firm relationship or self-clear if you have the capital. Obviously, the naming creates confusion. The two biggest issues are how many series will you have to make markets in - which is really a technology cost issue and kill switch issues. I have worked at the CBOE and later at the ISE. People always complained about mm advantage. At the ISE we wrote the Professional customer(the one that made you an mm) and every application we got was for SPX and later VIX which we didn't have rights to trade.
Last edited:
Makes no sense to us. But to "them" it does....
ajacobson: Sorry, I didn't mean to hijack the direction of this thread. I feel the need to educate as many as possible.
If procust signals adverse selection then mm margins are about to get juicy. Do you trade electronically?
Could you open a second account with another broker and maybe avoid this problem? This would give you almost twice as many orders to fill daily as long as you stayed under 390 on each one.
Care to post what deal TOS is giving you?