option commissions

Quote from donnap:

LOL - I remember reading some of your posts a decade ago about a few of those judgments. Now I can say "a funny thing happened on the road to riches" many times over.
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I'm sitting here trying to figure out whether I should take a fence or just go away :)

OK, back to work...
 
Quote from livevol_ophir:

I'm a market maker on NYSE ARCA. I see posts that we don't pay commissions... That's not true at all.

We pay commissions to the broker-dealer like everyone else. We average ~ $0.275 per contract taking a market and $0.16 for MM trades, and $3 per 1,000 shares of stock.
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I suppose you have to pay scaled, volume dependant commissions. As usual in the industry, larger volume should result in lower commissions, or?
 
Quote from stevenpaul:

Hi everyone!

You hear it all the time on this forum: such and such strategy is absolutely out of the question, unless you're a market maker or trading on the floor. Then, it's perfectly fine because, after all, they don't pay nearly as much in commissions. Or, you might hear how market makers often set up extraordinarily complex spreads whereby all 6 Greeks are neutral in order to profit on the bid-ask spread (whopping sum that it is). I'm becoming increasingly skeptical that market makers and floor traders have it so much better than the rest of us. How much exactly do they have to pay for commissions?

I know at IB the commission structure seems pretty good: The highest we have to pay is $0.70 per contract and it goes down to as low as $0.15, depending on the volume traded per month. Can the folks on the floor do any better than that?

Thanks in advance for the feedback.
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The chief advantage MM have is that they buy at the bid and sell at the ask. Because they stay delta neutral at the end of each day they are permitted much higher margin ratios, which makes it feasible for them to buy and sell large blocks of stocks or futures for delta hedging.
 
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