3 ms·
The not-insider-trading possibility: It's possible someone was selling contracts as a hedge since the tech market has been really bad this week. A market maker
by theogravity 3y ago
The not-insider-trading possibility:
It's possible someone was selling contracts as a hedge since the tech market has been really bad this week. A market maker was obligated to buy the contracts.
The person selling the contracts gets $22k in premium, and misses out on the pop. The market maker will absolutely exercise the contracts and profit.
(This is coming from someone who sold APPL calls expiring tomorrow for .08 at a high strike today)
Personal opinion: It's insider trading. You'd need a ton of shares to be able to sell $22k worth of contracts at a high strike unless you're doing naked options selling.
- qeternity 3y agoThis is not quite how things work. Market makers don’t just take risk and not hedge. They would have hedged deltas (by shorting stock) and gamma/vega by selling other stuff (or this offset stuff they had sold previously). Impossible to say whether an MM would have made or lost money but usually gap moves like this cost MM on a net basis.
- theogravity 3y agoYou're right, and it's something I should have mentioned.
- hyeomans 3y agoI understood nothing of what you said, what is a good resource/starting point to understand the meaning of this?
- theogravity 3y agohttps://www.investopedia.com/terms/o/optionscontract.asp https://www.investopedia.com/terms/o/optionscontract.asp In terms of how the market maker is involved: https://www.projectfinance.com/options-market-maker/ https://www.projectfinance.com/options-market-maker/ hedging: https://www.projectfinance.com/what-is-delta-hedging/ https://www.projectfinance.com/what-is-delta-hedging/
- tempaccount420 3y ago[flagged]
- johnvanommen 3y agoBuying options is a great way to go broke fast Selling options, on the other hand...
- alisonkisk 3y ago[dead]