Market Makers are colluding to price fix for short/medium term

[VanishingMediator]

Basically what is happening now is that HFT firms are failing to compete with one another and provide liquidity within certain ranges of price and time so that they can capture as much option profit as possible. There is a special emphasis on options close to expiration that can swing in value more easily over the course of their final trading days.

If someone buys a large bundle of close to expiration options, they will collude to price fix so as to prevent the options from becoming profitable for the purchaser. Obviously large human price pressure can temporarily stop this, but I have seen enormous swings on price on some of the stocks instantaneously on ridiculously low volume.

These are persistent and continue until the positions are exited or higher value positions are entered.

I have also been contacted by my broker firm when doing this asking me if he could put a note on my account and trying to prevent me from doing it.

They could attempt to use the excuse that they are market making for a wider time period, but the choice of this time period would be completely arbitrary. (How long should it take for Facebook to go up 3 dollars? How about just long enough that all of our option profits are maximized, and then it shoots up in one tenth the time and buy pressure of before!) There are many methods to create colluding algorithms.

 

[VanishingMediator]

P.S. > If you go through the list of Option trades for the day sorted by expiration, all the largest positions will be worth less than when purchased or have been sold for less than purchased.

They are blatantly price fixing to capture option profits from speculators.

Given the recent Volcker rule exemption for market makers, my guess is this is just another extension of the Obama administration's hatred of capitalism.

 

[Maverick74]

What the f**k? Dude, do you understand how VIX options are calculated? They don't USE expiring options. It's a 30 day forward. There is no collusion. Replace the tin foil hat. Man there have been some real weirdos on this site lately. Is there something in the drinking water?

 

[spd]

Man there have been some real weirdos on this site lately. Is there something in the drinking water?

Maybe the weirdo spread always widens around tax refund time, fresh thousandaires looking for a golden ticket? They all blow up and get bored anyways.

 

[VanishingMediator]

What the f**k? Dude, do you understand how VIX options are calculated? They don't USE expiring options. It's a 30 day forward. There is no collusion. Replace the tin foil hat. Man there have been some real weirdos on this site lately. Is there something in the drinking water?

This has absolutely zero to do with anything I was talking about

Plausible deniability fail

 

[spd]

If someone buys a large bundle of close to expiration options, they will collude to price fix so as to prevent the options from becoming profitable for the purchaser.

Or sometimes you are just flat out wrong without much time to spare holmes.

 

[sle]

What the f**k? Dude, do you understand how VIX options are calculated? They don't USE expiring options. It's a 30 day forward. There is no collusion. Replace the tin foil hat. Man there have been some real weirdos on this site lately. Is there something in the drinking water?

To be fair, I did not see anything about VIX in the above posts. Personally, I think the OP does not understand the basic mechanics of the options market (and the actual market making process), but I might be wrong. Very interested to see a real life examples of "market maker collusion"

 

[SIUYA]

If someone buys a large bundle of close to expiration options, they will collude to price fix so as to prevent the options from becoming profitable for the purchaser. Obviously large human price pressure can temporarily stop this, but I have seen enormous swings on price on some of the stocks instantaneously on ridiculously low volume.

These are persistent and continue until the positions are exited or higher value positions are entered.

why dont you simply wait and exploit this then?
plus - are you complaining about HFT or market makers?

 

[zdreg]

What the f**k? Dude, do you understand how VIX options are calculated? They don't USE expiring options. It's a 30 day forward. There is no collusion. Replace the tin foil hat. Man there have been some real weirdos on this site lately. Is there something in the drinking water?

is that a new signal for a market top?

 

[VanishingMediator]

Or sometimes you are just flat out wrong without much time to spare holmes.

The buy pressure is obvious, and in the past has resulted in steady climbs in price (or sell pressure when I had put positions).

What is happening now are steady climbs in price followed by ludicrous instantaneous drops on negligible trading volume. This is called hft market makers colluding to pin the price depending on their outstanding option contracts.

Slow trend reversals were common before when the buy/sell pressure let up for a bit, but I am not talking about that.
They are just flat out dropping/raising the price to where they want it to be instantaneously now to prevent stocks with large human trading volume from getting out of their control.