Market Making in US stocks during buyouts:

[daviavid]

I'm trying to develop a day trading strategy profiting with the rebates in stocks with high liquidity and low volatility, taking advantage of the low spread buying and selling in both sides. I saw the buyouts are the best scenarios to find this conditions.

Is there anybody who works with this kind of strategies? Where can I learn more info to develop it? I want to study more about the technology of the different ECN or other ATS and orders to know the priority of filling the orders, but I don't know where can I find this information clearly.

I would greatly appreciate it if there's anybody to share information and work together on this.

 

[newwurldmn]

Volumes are low and risk high because the rumor of deal changing news can cause big moves. You will be at an information disadvantage. Look at ALR a few days ago. A 5percent drop in 20 min. No news and it recovered over the next few days. If there was a real event that came out the next day the stock could have been down 15 points.

 

[daviavid]

Volumes are low and risk high because the rumor of deal changing news can cause big moves. You will be at an information disadvantage. Look at ALR a few days ago. A 5percent drop in 20 min. No news and it recovered over the next few days. If there was a real event that came out the next day the stock could have been down 15 points.

I'm looking at stocks which less volatility than ALR before that rumor, stocks moving between 1 penny during all the day, using very tighty stops.

 

[newwurldmn]

I'm looking at stocks which less volatility than ALR before that rumor, stocks moving between 1 penny during all the day, using very tighty stops.

There are no such things as stops when news or informed rumors come out.

I think you will earn small dollars (a penny on low volume) and then lose huge when an event happens. And events do happen.

Risk arb is a very tricky strategy to run - much less make markets in, given the value of information asymmetry.

 

[daviavid]

There are no such things as stops when news or informed rumors come out.

I think you will earn small dollars (a penny on low volume) and then lose huge when an event happens. And events do happen.

Risk arb is a very tricky strategy to run - much less make markets in, given the value of information asymmetry.

Makes sense to me the problem you pointed out, thank you. Would you please recommend me something (books, webs, a trader to talk) to learn in order to implement a market making strategy on intradiary terms?

Thank you.

 

[newwurldmn]

Makes sense to me the problem you pointed out, thank you. Would you please recommend me something (books, webs, a trader to talk) to learn in order to implement a market making strategy on intradiary terms?

Thank you.

Unless you have a technological edge, informational edge, or financing edge AND you have sufficient scale, I wouldn't even venture into making markets on stocks.

 

[DeltaRisk]

There are no such things as stops when news or informed rumors come out.

I think you will earn small dollars (a penny on low volume) and then lose huge when an event happens. And events do happen.

Risk arb is a very tricky strategy to run - much less make markets in, given the value of information asymmetry.

Almost impossible without access to OTC.

The financing is somewhat easy, technological edge is easy too.
What's hard is hedging it off correctly, I think you understand better than most.

The nonbank MM's do hedge with a 10 delta
range on most positions, but at a bank a risk officer would never approve that.