Discussion in 'Trading' started by ByLoSellHi, Apr 21, 2007.
Is it algorithmic?
If so, is it determined by individual makers?
ByLoSellHi, individual makers don't determine anything. Parity is established by the large masses of buyers and sellers who bid and offer contracts to each other. MMs react to the supply/demand dynamics. If an individual MM were to set prices by his own arbitrary whim he would lose money very quickly.
So, anyone who claims that systematic pricing, even for long term expiration put/call option contracts, is established in any way that's materially different than equity pricing (aside from the issues of liquidity, volatility and time decay) would be incorrect, right?
And it is safe to assume that there are as many inefficiencies, if not more, to exploit, in the options markets, as their are in the equity markets?
Actually ByLo, I really don't believe there are any inefficiencies in the options markets.
There are just too many human eyeballs and software robots looking at bids and asks all the time across all strikes and expirations for all securities and indices for a pricing mistake to exist for more than a few seconds.
So when the robots discover this in those few seconds...do they get the profit?
I really don't know Electric. I've never tried to do that but I imagine the opportunities would be rare and short lived.
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