Cancer Within Heart of Derivatives Market?
As a preference, not going to sit here and pretend that I know anything about corrupt hedge funds, or market makers, or make any claims of a variety that the meme stocks boys would howell in agreement with.
What I will say, is that there is clearly some sort of systemic flaw in the derivatives market system currently.
when a large cap lile NVDA, makes a 10% jump on the day, and it barely moves the prices up for weekly expiring options, we know something is a miss.
That at its core, the problem lies in the fact that the supply demand of derivatives is not fixed. Market makers can create as many new contracts, or close out as many contracts as they wish at any given time, allowing them not to necessarily manipulate stock prices, but by controlling the supply and demand they effectively can control the premium for these derivatives. There is very little oversight or reporting requirements for marketmakers on derivative pricing, unlike equities.
Have no idea how this will play out, but if we know one thing it’s that when elements of our securities and exchanges laws are being exploited, there’s usually some big big trouble ahead.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
White_Shadow :
DannyK99 : you ever heard of implied volatility and IV crush? After earnings IV plummets as it gets resolved, leading to a sharp decrease in option prices. I suggest learning all the Greeks even before dabbling in options
DannyK99 : this is not market manipulation by MMs. Traders like me and you will bid up the prices of options before earnings, increasing the IV significantly. Once the uncertainty of earnings is resolved, the demand for protective options decreases, leading to a significant drop in IV
DannyK99 : if you want to avoid IV crush, you can consider buying spreads or longer term options
LooseMooseOP DannyK99: Of course, very familiar with all of this, probably more so than you are.
First, you need to learn how to read, at no point did I even say that I had a position here.
Second, you should really consider familiarizing SEC 7 CFR Parts 200, 240, 249, if you do, you’ll realize that your comment just now is completely nonsensical and besides the point, because derivative dealers are held to a very specific set of responsibilities, and parameters for their activities, and in reality, doing a deep analysis of the Greeks would probably illuminate my point further.
Derivatives Are designed to function and provide very specific benefits to the market and investors. The Greeks are literally just a set of measurement, tools, and have no relevance to this other than the fact that they could possibly be used to identify when something is amiss.
LooseMooseOP DannyK99: Come on Danny boy? Nothing to say? Get over yourself and your biases.
LooseMooseOP DannyK99: No response to my rebuttal??
LooseMooseOP DannyK99: Again, learn to read at one point did this ever mention market manipulation??
DannyK99 LooseMooseOP: yes I know you didn't say you have a position. I get your SEC and CFR references. While these regulations set the parameters for trading activities, they dont address the utility or strategic application of options' Greeks directly in everyday trading decisions. Point being if you already know how high things like IV is, do expect that this is what's going to happen to weeklies
LooseMooseOP : I even prefaced the whole post by basically stating that this is not a rant about market manipulation. Systems that were once designed to fulfill certain purposes can overtime evolve into something with systemic problems. Nobody’s fault, no evil man behind the curtains, it happens all the time, my friend. You really have no idea how much goes into market making, it’s not something that one person, or even 100 people control. It has a life of its own.
View more comments...