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Strategies & Market Trends : Options
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To: Seldom_Blue who wrote (4944)3/14/2000 5:22:00 PM
From: Bridge Player  Read Replies (3) of 8096
 
<< except the MMs are at the other end of the trade in many instances. Once they publish the bid/ask, they HAVE to take the trade. So even if they are bullish on the stock, they still have to buy puts if people want to sell them. That is why they sometimes lose money if the market goes in one direction for too long. >>

It is my understanding that option MMs hedge practically every trade that they take themselves, either with short/long stock or with an offsetting option position. They are looking to make their profits strictly off of the spreads. Now, I am sure that they are not averse to a little front running from time to time when it can be well concealed.

But in the main, any MM that did not hedge so as to maintain, essentially, neutrality would soon find herself out of business.

BP
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