No they can't and the option "books" are exchange order books (Not their order book) and there are about 15 of them. Option MM use whatever method works for them to determine "fair value" at that moment in time for each option they post a market in. They don't care where the underlying will trade tomorrow (except for large gap moves) as long as they can hedge when needed with what gave them their edge.
Options Strategies using Order Flow
- Thread starter Chris Paciello
- Start date
No they can't and the option "books" are exchange order books (Not their order book) and there are about 15 of them. Option MM use whatever method works for them to determine "fair value" at that moment in time for each option they post a market in. They don't care where the underlying will trade tomorrow (except for large gap moves) as long as they can hedge when needed with what gave them their edge.
This is very important to understand. Broker crosses tied and untied to the underlying can be as much as 70% of trading volume on any given day on some exchanges.
sle, although your posts are very accurate, you are often talking on a PHD level when a high school level would be more helpful. I have an MBA and have been in the business for over 30 years and I have to read your post slowly.
1245
Point taken. Plus, I am having an unpleasant day (unrelated to trading) and definitely overreacted. Anyways, I am trying to say that big flows in long-dated options (for example, on the back of structured products or corporate issuance) definitely give you a signal, but the problem is how to interpret that signal. Detecting it is easy enough - a big OI appears and vols move one way or another. Let's say you see a new open interest in big Vega-size and vols move down - so somebody sold vol. Do you buy some since its cheaper then 10 min ago and hope it goes back up? Do you sell some because you think the seller has more to do? Unclear unless you really understand the flows and the players plus know something most market does not.
This is very important to understand. Broker crosses tied and untied to the underlying can be as much as 70% of trading volume on any given day on some exchanges.
sle, although your posts are very accurate, you are often talking on a PHD level when a high school level would be more helpful. I have an MBA and have been in the business for over 30 years and I have to read your post slowly.
1245
1234,
In reading this thread, I remembered an article I read a few days ago that puzzled me. Do you know how the MM profiled in this article can know (supposedly) that the counterparty for his trades was Lime Brokerage?
http://www.slate.com/articles/busin...g_twitter_meet_the_guy_it_cost_a_fortune.html
Thanks,
Occam
I have not been an option MM since 2010. Years before that time, on my trading sheets, I could see the counter executing broker OCC clearing number or a 4 letter code. I lost that ability 3 to 4 years before that. I'm sure as a BD, I could contact my clearing firm and ask who the counter party is from P&S, they could look it up. They won't do it for a customer.
Counter party info is available. What you won't know is specific account info "who at lime" traded, but you can it was a lime account.
These Option Hacker guys and anyone else selling an unusual activity options scanner are making money on marketing to idiots.
1) These unusual options activities DO NOT result in tangible Delta edge.
2) You can have access to any scan imaginable via livevolpro for less than $100, whereas these hack services will charge many times for just a few signals of their own making.
3) Long vol bets are speculative by nature and SHOULD NOT be looked at as consistent money makers.
4) I've seen trading shops literally front run popular reco's, then scalp using the order flow from their gullible followers. The most successful team I watched doing this literally had 25 different subscription services and tracked resulting orderflow. They would simply jump in early and scalp against the slow retail tards who piled on.
Robert Morse
Sponsor
Wow, you commented on a thread from 2016.