Illiquid back month options

elduerino · Mar 12, 2010

Hello, new hear, just had a question and wanted the forums opinion on the matter.

I want to get more involved with options trading, mostly providing liquidity in illiquid back month type stuff. With the introduction of penny pricing on a lot of options, do you think that I will be able to make some money stepping in front of the MM by a cent? Or is this a blow up my account type situation?

Thanks

inertia_trader · Mar 12, 2010

If you're going to play faux-market maker, you better have a lightning-fast way to move your bids and asks around quickly as the underlying moves. Undoubtedly, the market will have plenty of time to move around quite a lot while you're waiting for someone to pounce on your bid or offer in an illiquid market.

Personally, I wouldn't attempt this sort of thing as a retail trader. Just MHO.

elduerino said:
Hello, new hear, just had a question and wanted the forums opinion on the matter.

I want to get more involved with options trading, mostly providing liquidity in illiquid back month type stuff. With the introduction of penny pricing on a lot of options, do you think that I will be able to make some money stepping in front of the MM by a cent? Or is this a blow up my account type situation?

Thanks

Martinghoul · Mar 12, 2010

Most importantly, if you wanna do mkt-making of options, the most important thing to consider is transaction costs. One of the reasons mkt-makers are able to provide good liquidity is that they achieve economies of scale where transaction costs are concerned.

Illiquid back month options

elduerino

Newbie

inertia_trader

Newbie

Martinghoul

Senior member

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