Market Maker shakeout-post experience

Discussion in 'Trading' started by hitman4gk, Feb 6, 2007.

  1. any vlaidity to this? i have been trading a while and sometimes think market makers sell some inventory on thinly traded stocks to cause the price to fall..this causes a chain reaction and causes stops to be taken out.. they then buy the stock cheaper..lets say they sell 10,000 shares at and knock the stcok down would ask why buy it back,its a wash..however,that 10k share sell would cause stops to be takem out and would cause a much bigger drop..the stock is at 40 and he dumps 10,000 shares at once..he gets filled at 29.84 avg because some is filled at 40 all the way down to .72., however,lots of stops are at .80 and .75..this triggers stops to get taken out and now the stock is at 39.20 where he buys and sells again at 40...anyone ever see this or agree with my logic..this also happens pre-mkt and after hours when a stock has good news..they try and create an illusion that the stock is selling...any opinions or experiences to share?
  2. i must of been drinking when i just posted this...sorry about the grammar,, stock is at 40 and the market maker sells 10,000 shares at once for an avg price of 39.82,,thats what i meant in the above example. also,i meant validity not vladity.
  3. Happens with boring regularity, especially with thinly traded stocks.
  4. A lot of market makers lean on options orders to trade stock, e.g. if an order for say 100 delta 80 calls was bid in the market and was close to being traded, an market maker will buy the stock and bid more in the market to get enough deltas for the hedge, and if the hedge doesn't come they make on the stock as it rallies.