Options Trading Is Rigged Against Average Investors; Payment for order flow allows brokerages and b

[Drawdown Addict]

why is this a problem? market makers are saying retail traders are so dumb, they will pay your commissions to trade with you. You are smart, so let them pay your commissions for you. They still have to show your order to the market when they realize you are smart.

Being a FIRM sucks. There's a guy on here whose strategy ended because he was considered a FIRM. He's very smart.

You do know where the problem is at. Looking at your replies on the forum, you either are a professional trader or have been around many of them.

How many times have you heard people saying:
"The market went right against my trade just to hit my stop and then retraced back to continue in the direction I predicted. Unfortunately, I was stopped and lost that trade."

What happens is that behind that amazing service that MM provides, to assign liquidity to a market, they trade against a cloud of stops, exactly to capitalize on retail trading.

They move a market against the majority of retail capital, and they can do that because they know where the stops are. And they can know where the stops are because of PFOF. Easy logic.

So, there is one side that is legit that no one can challenge: Liquidity providers.
But the other side is "stop hunting" and that is where the problem is. You do know that.

Someone shared this video a while ago:

The host is horrible, but if you ignore him and listen to the guest, he points exactly that way of rigging the market against retail capital. Not only in that video but many times through the channel.

 

[newwurldmn]

You do know where the problem is at. Looking at your replies on the forum, you either are a professional trader or have been around many of them.

How many times have you heard people saying:
"The market went right against my trade just to hit my stop and then retraced back to continue in the direction I predicted. Unfortunately, I was stopped and lost that trade."

What happens is that behind that amazing service that MM provides, to assign liquidity to a market, they trade against a cloud of stops, exactly to capitalize on retail trading.

They move a market against the majority of retail capital, and they can do that because they know where the stops are. And they can know where the stops are because of PFOF. Easy logic.

So, there is one side that is legit that no one can challenge: Liquidity providers.
But the other side is "stop hunting" and that is where the problem is. You do know that.

Someone shared this video a while ago:

The host is horrible, but if you ignore him and listen to the guest, he points exactly that way of rigging the market against retail capital. Not only in that video but many times through the channel.

market makers trade millions of contracts a day (in 10 lots or less). You think they are going to try to move the market against your 10 lot?

If they didn’t have PFOF “they” could still move the market away from you.

 

[Robert Morse]

I understand the concern and how it looks. IMO, reality is a little different. The place you put your stop to sell might be a new low, a break down price, a price below heavy volume, etc....When a few thousand day traders place stops on or about the same price, you can't blame a MM's system from seeing a large number of sell orders and dropping their bids to scale down. Then the selling stops and buyers have a chance to move back in. This happens in many asset classes including futures, where no one can see the Stop orders. As much as I'd like to blame someone, the blame is always the responsibility of the trader. He or She gets the credit for the good and the bad.

How many times have you heard people saying:
"The market went right against my trade just to hit my stop and then retraced back to continue in the direction I predicted. Unfortunately, I was stopped and lost that trade."

 

[2rosy]

You do know where the problem is at. Looking at your replies on the forum, you either are a professional trader or have been around many of them.

How many times have you heard people saying:
"The market went right against my trade just to hit my stop and then retraced back to continue in the direction I predicted. Unfortunately, I was stopped and lost that trade."

What happens is that behind that amazing service that MM provides, to assign liquidity to a market, they trade against a cloud of stops, exactly to capitalize on retail trading.

They move a market against the majority of retail capital, and they can do that because they know where the stops are. And they can know where the stops are because of PFOF. Easy logic.

So, there is one side that is legit that no one can challenge: Liquidity providers.
But the other side is "stop hunting" and that is where the problem is. You do know that.

Someone shared this video a while ago:

The host is horrible, but if you ignore him and listen to the guest, he points exactly that way of rigging the market against retail capital. Not only in that video but many times through the channel.

MM know where stops are because PFOF? This is not true

 

[Quanto]

I think also the "American Style" in options trading is predestined for rigging and robbing the traders,
b/c the trader gets stopped by the counterparty as soon as his position is even slightly in loss, so that the counterparty closes the trade by early exercising.
Of course also the broker itself (his secret buddies) can claim to be the counterparty! Since the broker knows all data of the trades...
American Style looks much like a nightmare, IMO... Should be abondoned by the European Style, so to disallow any such "early exercise / early assignment frauds".

 

[Sergio123]

I think also the "American Style" in options trading is predestined for rigging and robbing the traders,
b/c the trader gets stopped by the counterparty as soon as his position is even slightly in loss, so that the counterparty closes the trade by early exercising.
Of course also the broker itself (his secret buddies) can claim to be the counterparty! Since the broker knows all data of the trades...
American Style looks much like a nightmare, IMO... Should be abondoned by the European Style, so to disallow any such "early exercise / early assignment frauds".

You, and your broker should be in alignment with the same goal to grow your account so that you can trade more.

I was eating alot of early assignments in September. But It ended up working out well.

If you can figure out what you should be doing then you can make money in whatever market participant role that you are in.

 

[Windlesham1]

Order flow, level 2 -does it mean anything? I tried trading futures watching the price action and it was nonsense. Trading options is a level playing field if you use all the tools, set your price limits and remember time is your friend.

 

[Robert Morse]

I find that early assignments are very predictable. With ITM short calls, they most often occur before a large dividend that exceeds the cost of carry + the value of the put on the same strike. Or, if the symbol is VERY hard to borrow and part of a Threshold list. In either case, owning the stock might have more value than the ITM call. I disagree with many of the aggressive terms you used as you have free will to choose what to trade, how long to hold it and when to exit. And assignments are distributed among clearing brokers by a formula from the OCC, not your counter party on that trade or your broker. The OCC makes the rules for this, and OCC member firms follow them.

I think also the "American Style" in options trading is predestined for rigging and robbing the traders,
b/c the trader gets stopped by the counterparty as soon as his position is even slightly in loss, so that the counterparty closes the trade by early exercising.
Of course also the broker itself (his secret buddies) can claim to be the counterparty! Since the broker knows all data of the trades...
American Style looks much like a nightmare, IMO... Should be abondoned by the European Style, so to disallow any such "early exercise / early assignment frauds".

 

[Quanto]

@Robert Morse, nobody can control/verify that the assignment came from the OCC...
And, can OCC be trusted?...

And: my options trade takes much analysis time before opening the trade.
But to see get stopped is very damaging b/c it's not easy to open anew to continue the trade, as the opportunity no longer exists...
Of course I'm meaning long term trading, not daytrading.

 

[Quanto]

I was eating alot of early assignments in September. But It ended up working out well.

If you can figure out what you should be doing then you can make money in whatever market participant role that you are in.

So, what can one do to prevent such an early assignment?
Doubling down the current unrealised percentual loss? Hmm... not really my taste...