Futures options liquidity issues

Discussion in 'Options' started by nravo, Nov 3, 2006.

  1. nravo

    nravo

    Was this called Painting the Tape? Also, maybe it's late and I 'm brain dead, but if, say, there is only an OTM put option, let's say 1.50 and no bid. And I were to IM Rosy and say I want to sell her a put at 1.40, and she agrees. What does she gain? She'll be long a put and presumably hedging with a long stock, no? I would be happy to have her do this when ever I am missing a bid on a quote.

     
    #21     Nov 5, 2006
  2. It has nothing to do with what she gains or what you gain. For all CBOT/CME knows, you and Rosy have a side agreement where you will incur no losses on options sold to her in an effort to drive down volatility.

    I'm not saying Rosy is a great threat to mankind, only that by communicating with her before a trade, you and she are violating exchange rules. Follow the rule or not, it's up to you.

    In any case, the rules aren't all that limiting. I'm not a lawyer, but I see nothing wrong with IM-ing Rosy one of two things:
    1) "I want to sell a XYZ nn put", and let her post a fair bid on Globex/eCbot. You either hit it or not.
    2) You post an offer on Globex, and IM her, "I'm selling an XYZ nn put". She can either hit it, or make a counter bid.

    Negotiating a price beforehand is not legal, nor is asking Rosy if she would buy if you were to offer at a certain price. A simple, legal, transaction would seem to be: You post an offer, she posts a counter-bid. You hit it or not. As long as you do all of the price matching ON the exchange rather than as an aside, you're fine.
     
    #22     Nov 5, 2006
  3. nravo

    nravo

    I hear you and play things squeaky clean; I'm just not seeing a whole lot in it for Rosy.

     
    #23     Nov 5, 2006
  4. Grant

    Grant

    Isn't the problem of using non bona fide mm's that of enforcing a contract, ie if it goes the wrong way (for either side) resulting in a loss and one side walks away, what recourse is there beyond civil (or criminal?) proceedings?

    Further, if one of the parties lacks the financial resources to fulfill their side of a bargain, it descends to a lose-lose situation.

    There are enough authorised dodgy operators, and we don't want to compound the problem.

    We need protection from the laissez-faire now and again.

    Grant.
     
    #24     Nov 5, 2006
  5. rosy2

    rosy2

    this is exactly what i would do. We would *not* negotiate a price but rather beat a price or post a quote for an option.

    My gain would be buying the bid and selling the offer. If you want to sell a put that currently has no bid then I would post a bid (not necassarily a good one and definately not to your advantage)
     
    #25     Nov 5, 2006
  6. rosy2

    rosy2

    thats true for OTC products that are not cleared with a third party. Everything I proposed is exchange cleared and no one can walk away.
     
    #26     Nov 5, 2006
  7. Grant

    Grant

    Rosy,

    Therefore, can I assume you are a ""bona fide" mm?

    It's not apparent from the posts. Speculation on this thread would be non-existent and the thread would be reduced by 50%.

    Right or wrong, posters are judged by perception - and misconceptions - rather than reality. However, ambiguities can't be avoided as long as they are perpetuated or lack clarity.

    It's shameful, but I'm guilty of the above.

    Don't hide you light under a bushel (if that's the correct term).

    Grant.
     
    #27     Nov 5, 2006
  8. rosy2

    rosy2

    no, I am no a marketmaker and have no exchange membership. I have a retail account. did you read the posts? I do not know what is so hard to comprehend here.

    if you want a bid or offer for an exchange traded security, I would be willing to post it through my account then you would see it on your screen and hit it or not. I cannot make this any clearer.
     
    #28     Nov 5, 2006
  9. nravo

    nravo

    LOL. Ok, Now I get it. You would create the other side of the trade -- at your price, not mine. Well, shit, I would do that, too! Your basically doing (answering) a RFQ, right? I'll keep you in mind if I wanna get hosed -- just joking.

     
    #29     Nov 5, 2006
  10. Grant

    Grant

    Rosy,

    What is hard for me to comprehend is the apparent ease with which you can do this.

    I am totally ignorant of the mechanics of, and requirements for, quoting on Globex.
    But from what you say, it seems anyone can (legitemately?) act as mm. That is what I have difficulty with.

    Grant.
     
    #30     Nov 5, 2006