Options sellers / market makers move the market near expiration?

C

crgarcia

It is said that option market makers hedge their positions with the underlying (at least when it moves beyond a certain point).

So if options move against them, they will be heavily buying/selling to hedge?
Doing so they stabilize (reverse) the market so that most options expire worthless.
 
Quote from cvds16:

it all depends whether they are long or short options
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Market makers usually start by short selling options to 'create' them. Then the general public buys them before, then sells it (to other traders or to the market maker).

They 'create' both calls and puts. How many calls/puts they create?
I guess it depends on market expectations and specific demand for calls or puts.
 
this is not true, institutions are mainly sellers, individual traders are mainly buyers, it's the overall position that's important. If the market maker is long options he's is seller above the strike and a buyer below the strike. If he is short options he is a buyer above the strike and a seller below the strike. This is an automatic effect of delta-hedging.
 
Quote from crgarcia:

Market makers usually start by short selling options to 'create' them. Then the general public buys them before, then sells it (to other traders or to the market maker).

They 'create' both calls and puts. How many calls/puts they create?
I guess it depends on market expectations and specific demand for calls or puts.
More...

Market makers don't really create anything. If someone comes in and wants to buy or sell an option a market maker would take the other side, so it's not given that a market maker starts with a short option.

And there's no set number of contracts that are "created". An option contract doesn't exist until a buyer and a seller make a trade.
 
Quote from crgarcia:

Market makers usually start by short selling options to 'create' them. Then the general public buys them before, then sells it (to other traders or to the market maker).

They 'create' both calls and puts. How many calls/puts they create?
I guess it depends on market expectations and specific demand for calls or puts.
More...

Selling options to whom? Market makers are slaves to flow. There is no volume w/o paper entering the pit/post. Where did you get the idea that the MM usually creates OI by selling vol to open?
 
Quote from atticus:

Selling options to whom? Market makers are slaves to flow. There is no volume w/o paper entering the pit/post. Where did you get the idea that the MM usually creates OI by selling vol to open?
More...

I think it more closer to be true... The biggest group of trading that trade on market is arbitrageur....Why??? The answer is simple,,THe arbitrageurs in most case are an instutianal traders and they can create market in experation day.. The reason is simple too....This guy have only two way to trading in this day
1.Close they position that may to cause a 'Bear' market..
2. They can rolling to the next future...

The way that arbitrageurs are used in last day you can predict by watching the future and stok market in the period of Existence the futures...

Sorry for my English....

From Russia with Love :)
 
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