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> I used to make equity derivative markets. By market, I was referring to the stock market. Also, are you claiming to be a market maker? > About thirty minute

> I used to make equity derivative markets. By market, I was referring to the stock market. Also, are you claiming to be a market maker? > About thirty minutes after CNBC said something about something, a tsunami of idiotic Charles Schwab and friends order flow would hit our systems. It absolutely moved prices. It doesn't take 30 mins after the news breaks for stocks to move. And the move is usually orchestrated by the big boys and their algos. The herd can certainly follow the move of the big boys as they dump their shares on the late arriving retail investors. But the move is controlled by the big boys and of course the market makers as they tried to leech out as much off the spread as possible. Unless you are referring to lightly traded stocks or OTC stocks with no volume. There isn't much retail trading derivatives. The derivative markets are almost exclusively dominated by hedge funds, banks, large investors.

JumpCrisscross 9y ago
> I was referring to the stock market. Also, are you claiming to be a market maker? I used to be a market maker of stock options, amongst other things. > It doesn't take 30 mins after the news breaks for stocks to move When it comes to markets, test every assumption. In reality, information diffusion is unpredictable and heterogenous [1]. This is due to, in part, the "effects of limited attention in at least part of the population of investors in the market, interacting with some more sophisticated investors with better access to information processing technologies" [2]. > The derivative markets are almost exclusively dominated by hedge funds, banks, large investors Individual stock (versus index) options are actively traded by individual investors [3]. Individual investors also actively trade futures [4]. [1] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.652.1162&rep=rep1&type=pdf http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.652... [2] https://pdfs.semanticscholar.org/b180/3e674cc6be4de275cda1aa0f174c6e44156b.pdf https://pdfs.semanticscholar.org/b180/3e674cc6be4de275cda1aa... [3] https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2013.1841 https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2013.184... [4] https://www.sciencedirect.com/science/article/pii/S1566014116000030 https://www.sciencedirect.com/science/article/pii/S156601411...
- dragontamer 9y ago
  Options are great, even for individuals. The main issue is that everything is in size 100 lots, so a huge number of stocks are simply "too big" for me to regularly use options on as an individual. If I were to do something like sell a put option on AAPL ($156.41 at the moment) would be $15641 into a single stock that I may have to put up. I'm closer to ~$5000 per trade as an individual, its not like I have as much money as those banks or hedge funds. In short: I'm only really able to buy and sell options on shares with $50 or lower prices. At least with my relatively conservative trading style. But still, selling puts is a cool way to be "paid to be forced to buy a stock", and if you're worried about missing the upswing, you can always sell a put (at the money) + buy a call out of the money. Such a trade benefits from the volatility of the market, and is still strictly safer than owning the stock outright. I mean, I'm a long-term buy-and-hold investor. Selling puts + buying a FOMO out-of-the-money call option is a really good trade most of the time. Given the tradeoffs and the decisions I've made on my portfolio. It basically allows me to benefit from market volatility.
  - grahamas 9y ago
    Could you recommend any resource for gaining that understanding of options? Not just technically, but in terms of the strategies you've sketched here (obviously I can and have googled the definitions).
    - JumpCrisscross 9y ago
      > Could you recommend any resource for gaining that understanding of options? The Options Clearing Corporation [1] actually has a solid set of introductory courses [2]. That said, I am very conservative about when I believe individual investors should be trading options. (With surplus investment capital, i.e. after tax-advantaged retirement accounts and liquidity reserves have been maxed out, and principally for purposes of hedging (versus leverage). [1] https://en.wikipedia.org/wiki/Options_Clearing_Corporation https://en.wikipedia.org/wiki/Options_Clearing_Corporation [2] https://www.theocc.com/education/ https://www.theocc.com/education/

JumpCrisscross 9y ago

> I was referring to the stock market. Also, are you claiming to be a market maker? I used to be a market maker of stock options, amongst other things. > It doesn't take 30 mins after the news breaks for stocks to move When it comes to markets, test every assumption. In reality, information diffusion is unpredictable and heterogenous [1]. This is due to, in part, the "effects of limited attention in at least part of the population of investors in the market, interacting with some more sophisticated investors with better access to information processing technologies" [2]. > The derivative markets are almost exclusively dominated by hedge funds, banks, large investors Individual stock (versus index) options are actively traded by individual investors [3]. Individual investors also actively trade futures [4]. [1] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.652.1162&rep=rep1&type=pdf http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.652... [2] https://pdfs.semanticscholar.org/b180/3e674cc6be4de275cda1aa0f174c6e44156b.pdf https://pdfs.semanticscholar.org/b180/3e674cc6be4de275cda1aa... [3] https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2013.1841 https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2013.184... [4] https://www.sciencedirect.com/science/article/pii/S1566014116000030 https://www.sciencedirect.com/science/article/pii/S156601411...

dragontamer 9y ago
Options are great, even for individuals. The main issue is that everything is in size 100 lots, so a huge number of stocks are simply "too big" for me to regularly use options on as an individual. If I were to do something like sell a put option on AAPL ($156.41 at the moment) would be $15641 into a single stock that I may have to put up. I'm closer to ~$5000 per trade as an individual, its not like I have as much money as those banks or hedge funds. In short: I'm only really able to buy and sell options on shares with $50 or lower prices. At least with my relatively conservative trading style. But still, selling puts is a cool way to be "paid to be forced to buy a stock", and if you're worried about missing the upswing, you can always sell a put (at the money) + buy a call out of the money. Such a trade benefits from the volatility of the market, and is still strictly safer than owning the stock outright. I mean, I'm a long-term buy-and-hold investor. Selling puts + buying a FOMO out-of-the-money call option is a really good trade most of the time. Given the tradeoffs and the decisions I've made on my portfolio. It basically allows me to benefit from market volatility.
- grahamas 9y ago
  Could you recommend any resource for gaining that understanding of options? Not just technically, but in terms of the strategies you've sketched here (obviously I can and have googled the definitions).
  - JumpCrisscross 9y ago
    > Could you recommend any resource for gaining that understanding of options? The Options Clearing Corporation [1] actually has a solid set of introductory courses [2]. That said, I am very conservative about when I believe individual investors should be trading options. (With surplus investment capital, i.e. after tax-advantaged retirement accounts and liquidity reserves have been maxed out, and principally for purposes of hedging (versus leverage). [1] https://en.wikipedia.org/wiki/Options_Clearing_Corporation https://en.wikipedia.org/wiki/Options_Clearing_Corporation [2] https://www.theocc.com/education/ https://www.theocc.com/education/