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

[sle]

This is called hft market makers colluding to pin the price depending on their outstanding option contracts.

Puts or calls? Also, how do you know what is the market maker position - open interest will only tell you the outright contracts, not the direction.

 

[SIUYA]

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.

what you are suggesting is either....
the MM with large long volatility options positions are happy to pin prices to the strike which gives them maximum time decay with little volatility....or
the MM with large short volatility options positions are happy to push prices away from their strike only to then have suddenly come back to the same strike.....and they of course get left with a long position.....

why would anyone do what you are suggesting?

 

[Maverick74]

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"

Ahh, my bad. I saw the word fix and thought it was vix. LOL. I stand corrected. I have a bad glare on my laptop.

 

[Dolemite]

Ahh, my bad. I saw the word fix and thought it was vix. LOL. I stand corrected. I have a bad glare on my laptop.

Either that or you are part of the option fixing syndicate and you were trying to change the subject?

 

[athlonmank8]

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.

youre nuts.

 

[athlonmank8]

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.

get help

 

[TskTsk]

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.

I thought the Volcker rule itself was anti-capitalist? Isn't it just red-tape? Shouldn't then exemption be pro-capitalist?

Hell who knows. Logic or consistency was never a strong point amongst the pro-deregulation or anti-Obama crowd.

BTW do you understand that MMs manage global risk? Unless some MMs corners the entire option chain and correlated markets (not just a single strike) he won't be able to profit.

 

[trickyname]

Loving this thread.

What was "it" that you were trying to do that your broker wanted to stop you from doing further?

And please read up on pin risk. If someone sells a lot of options and MMs are long, there will be natural pressure to pin the strike, as the range that the underlying needs to move for the MMs to break even will be lower owing to the lower option premium they paid.

Price movements on low volume are also very common. Take a look at the market volume on 4/21 -- volume in ESM4 was barely a quarter of what it usually is, and the market floated higher and higher.

 

[VanishingMediator]

I thought the Volcker rule itself was anti-capitalist? Isn't it just red-tape? Shouldn't then exemption be pro-capitalist?

Hell who knows. Logic or consistency was never a strong point amongst the pro-deregulation or anti-Obama crowd.

BTW do you understand that MMs manage global risk? Unless some MMs corners the entire option chain and correlated markets (not just a single strike) he won't be able to profit.

Monopolies (vertical or horizontal) are not capitalistic. The governments real one purpose should be to prevent anyone else from becoming a government and stopping competition.

 

[VanishingMediator]

Loving this thread.

What was "it" that you were trying to do that your broker wanted to stop you from doing further?

And please read up on pin risk. If someone sells a lot of options and MMs are long, there will be natural pressure to pin the strike, as the range that the underlying needs to move for the MMs to break even will be lower owing to the lower option premium they paid.

Price movements on low volume are also very common. Take a look at the market volume on 4/21 -- volume in ESM4 was barely a quarter of what it usually is, and the market floated higher and higher.

The events I described were very specific, not just "oh some pinning and low volume moves are common"