3 ms·
It seems to me it's because "market makers" are a thing. Market making activities create billions in profits. But we are seeing the flaw in the market making al
by socialist_coder 6y ago
It seems to me it's because "market makers" are a thing. Market making activities create billions in profits. But we are seeing the flaw in the market making algorithms.
Do we need market makers to let us always take a position in every single option when no real market for that option exists? I would argue no. It's completely artificial and they profit from it. If companies want to be market makers and profit from every single transaction, they need to be prepared to take a loss when the math doesn't swing their way.
- hehehaha 6y agoMM is different from RH. RH would actually need to get collateral (or raise money) to allow its customers to trade GME at this volatility. I really think the anger should be directed at Wall Street and the Fed for creating a frothy investment environment and not doing anything about it. RH OTOH is trying to be a disruptive player.
- socialist_coder 6y agoI understand that RH is not a MM. So then why does RH have to manage its risk from the holdings of it's own customers? I am not a finance professional but I thought RH is just like a custodian and facilitator of trades. It's not on the other side of any of these trades. It never holds any positions. Why does it have to manage its risk and why does a GME event create extra risk for RH? I thought this kind of risk is only for the MM's like Citadel.
- socialist_coder 6y agoI think this explains it: https://news.ycombinator.com/item?id=25951475 https://news.ycombinator.com/item?id=25951475