Option Market Makers vs Stock Market Makers

Discussion in 'Options' started by newwurldmn, Nov 22, 2011.

  1. newwurldmn


    Why do people always assume that in options that only the market makers can make money (because the zero sum they say) but no one says the same about stock liquidity providers. Isn't all trading zero sum? Why are people so afraid of option market makers but not stock market makers or high frequency traders?
  2. IVtrader


    per your comment"isn't all trading is zero sum". the fact is that you have no idea what the portfolio is that the person on the other side has. they could be taking the other side to adjust a pre existing option trade,open a new trade, hedge a stock postion,etc
  3. newwurldmn


    They could be. The way I see the world is the following:

    The stock market goes from 1000 to 1500 (this is real wealth creation due to production). How that 500 points is divied up is the zero sum.

    Anyway, my question is that everyone is scared of options market makers. Often a comment on any options strategy is "the market makers are the casino house. They always win." or "How do you beat the edge of the market makers."

    How come people don't feel so strongly about cash market makers, or futures market makers?
  4. IVtrader


    those comments are typically made( more often than not) by r-e-s-p-e-c-t-f-u-l-l-y beginners who if they are persistent enough and eventually learn the craft will in time recognize that marketmakers just have more knowledge than the beginner has.

    anyone can acquire the knowledge. and there are not a few retired marketmakers that mentor individuals to learn that "edge".
  5. The stock market is either negative sum (zero sum minus commissions and other costs) or positive sum (real wealth is created over time) depending on how you look at things.

    Market makers don't always win. No system, no method, no secret can always win or there would be no market. Who would take the other side of the trades?

    I KNOW it is possible to win at options consistently over time especially in this past month, but that means hard work and most are not willing to put in the time required. They want an easy never-fail method.

    The second issue is that many people think they know about options, but really don't as evidenced by their comments. Options require an enormous amount of study and practice to learn to trade well. People are over-confident about their own abilities.

    The only true test is are you making money or not. If not, then study some more and start by questioning the basic comments made and why they might be wrong.

    Just my 2 cents worth.
  6. rosy2


    :confused: people complain about all of them. where have you been?
  7. spindr0


    The option market is zero sum. That person's portfolio isn't necessarily zero sum if they're utilizing the UL because the stock market isn't zero sum.
  8. 76132


    And where are these mentors? I'd like to learn.
  9. IVtrader


    I can refer you to 2 whom I've had experience with. (and no I receive no financial inducements for doing so)

    email me privately and I'll provide contact info.

    jimr_77024@yahoo.comholidayseason(note munged address). put "option mentor" in subject field
  10. bc1


    Darn. Just when I thought I was doing so good in my second month of trading options. 34.94% ROI Now you seem to be saying that this month is an aberration. :(
    #10     Nov 25, 2011