question re "playing market maker" on electronic options markets

Discussion in 'Options' started by MichaelJ, Jul 15, 2009.

  1. Hi all - I have a question regarding options markets. I've been mostly out of active trading for quite some time, but I like thinking about it, so please excuse any ignorance on my part...

    Back in the day, electronic access and ECNs put retail on a much more level playing field with institutions. One could place bid/offers and try to capture the spread; when I was sort of a SOES bandit in the 90s the strategy of "playing market maker" in Nasdaq stocks started to become prominent (capturing 1/8 and 1/4 in the era before decimalization).

    But, the options markets are still very closed in that sense. For example, I believe that while most of the big *equity* option exchanges allow retail to place bids/offers, there are cancel fees and rules against retail traders trying to quote two sided markets, since that is the MMs' domain.

    How about options on *futures* that are electronically traded? It seems that the ICE has Russell 2000 futures, and the options on those are all electronic. Can one bid/offer in these as a retail trader?

    I'm unclear about ICE's sugar (or coffee/sugar/cocoa) options; is there still a floor in NY that competes with the electronic version?

    Seems like CME is slow to hurt the MMs' business, eg Eurodollar options are still mainly in the physical pit. What about Eurex?

    In summary, I appreciate any insight into what electronic options markets around the world have the most level playing field (granted, it will probably never be flat) for retail trying to pseudo make markets?
  2. The good news is "you can play market maker on futures options". The bad news is " there are not enough trades for you to make the market". If you really like to play as a market maker,
    how about openning two accounts so you can post bids in one account, post asks in other account? Have not tested if this idea
    works. Just a suggestion.
  3. One of the most liquid futures options is ES on Globex. Try to
    make a makert on ES and hedge it with spy options and spy.....?
  4. just21


    ES options appear to be harder to get filled in than last year.
  5. MTE


    Why would you use spy options and spy to hedge ES options!?:confused: Just use ES futures!
  6. There are many ways to skin a cat so to speak. The
    cleanest way is using another ES option to hedge if
    you can catch the bid ask spread which is very unlikely.
    The assumption here is ES options have wider bid ask
    spread than equity options spread.