Unusual activity

Discussion in 'Options' started by ETJ, Sep 13, 2019 at 6:34 PM.

  1. ETJ

    ETJ

  2. qlai

    qlai

    "The largest single trade was the 1260lot sweep buyer"

    I don't understand how one can sweep options markets when MMs are running fastest software and their main risk is informed traders? The symbol doesn't sound like it would have very liquid options.

    Also, I was under impression that if a MM gets seriously screwed on such trades, the trades may be reversed.
     
  3. kv1289

    kv1289

    Sweep:
    Imagine you are running an online business selling shoes. If you have 1000 pairs available and you list them all for sale any buyer can purchase them. You might be very quick to increase the price if you see they are in demand and selling quickly. However if one buyer comes in and purchases all of them in a single transaction you have no chance of increasing the price regardless of your speed.
    Your next thought might be... Why would a seller be silly enough to put all 1000 for sale at once. And the answer is sometimes the exchange will give market makers an incentive to show a certain amount of size in the book. Other times (based on product and venue) the market makers gets allocation of the customer order based on the % of the market they represent.

    Reversed trades:
    Typically the exchange has rules regarding which trades get reversed (aka busted). From my understanding it's only trades that transact at prices way off the market or if the exchange has some technical issues. Even then it can be a case by case basis. Generally speaking if you get swept as a market maker there is no recourse.