Quote from wilburbear:
With pennies, bettering the given market is not rewarded.
...the market makers have a program that automatically goes a penny ahead of my bid.
You can use this to your advantage, though it works much
better foir options on futures and SSF's, where there are
no explicit cancel fees.
If you are trying to buy, offer a penny less than the market
maker. If he (or his bot) is awake, he will often jump your
offer by a penny. Now cancel and replace your offer two cents
better. He may jump you again. Then cancel your offer and
lift his offer in two nearly simultaneous mouse clicks.
For futures options and SSF's with wide spreads, you can
often move the market maker's bid or offer to the original
midpoint. Or even beyond the midpoint if the midpoint was
off the implied vol surface.
It sometimes takes a few minutes of activity (entering and
canceling bids and offers) before the market maker or his
bot wakes up and starts reacting.
You can also use this technique to protect a bid as the
market maker will not offer down below a certain distance,
typically about half the original spread, from his offer. Go
through the procedure above and move the mm's offer
down near the middle. Then place your bid. In cases where
the same mm is on both sides, he will not then jump youir
bid. Pay attention to this one -- if the market moves quickly
the one-penny-worse offer you are using to pin the mm's
offer in the middle may get picked off and you will end up
short instead of long.
.
