difference between market-making and just proprietary trading?

Discussion in 'Options' started by carl1111, Feb 20, 2006.

  1. Yes, that's the sort of answer I was looking for. Wonder how useful order flow is ?
     
    #31     Mar 6, 2006
  2. MTE

    MTE

    What do you think?
     
    #32     Mar 6, 2006
  3. Depends.

    If you knew Buffet was buying up GooG might be wise to join him :)
     
    #33     Mar 6, 2006
  4. proption

    proption

    The benefits of order flow are a little more subtle than that. Imagine a rising market and you have been hit on the bid. You immediately have the bid ask spread as a cushion (stop loss) for your long if you know there are other orders there to buy too.
     
    #34     Mar 6, 2006
  5. sle

    sle

    Very. One can avoid stepping in front of a running train given the info i.e. Goldman just sold a ton of 9m10y, so I'd avoid getting long gamma, since they might have more to do.

    Also, a market maker would generally maintain a negative gamma bias. This way, in quiet times he's long theta, while in volatile time he'd be the first one to see the bids and lean his markets accordingly.
     
    #35     Mar 6, 2006
  6. sle

    Top stuff ! Thanks.
     
    #36     Mar 6, 2006