You haven't made one supportable statement. The stock averages 300 contracts/day at about $2. That's $60Gs. The entire open interest is worth maybe $1000Gs. The stock trades that amount of money in 10 minutes, so please tell me how MMs are shorting in the option market in order to hedge, protect, or make money for themselves?
That may take place on the NYSE but its level of activity in smaller cap NAZ is extremely limited, unprofitable, and dangerous. It isn't necessary to use questionably priced and volatile options to manage either account, trading or investment and there are restrictions about such activity. The margin rate is sufficiently low so that trading account management is primary without gadgets and is conducted without any target in mind. If an MM were to have a prejudice about some number, they wouldn't stay in the business long. The market dictates what the MM will do. Almost without exception that means getting on the other side of the public's orders when there is no public offsetting action. It is called making an orderly market.
Now if you are claiming that the public is attempting to fix a price in order to protect wasting shorted options, then you may be right. But that is a dangerous game even for institutions. The observation that price is held around strike on expiration is an inference in a non-strategy. If an institution and many large public players, are short calls against long stock, then they certainly have the right to not buy which may raise price against themselves. The market makers will not interfere with a lack of action because they are prevented by rule from initiating action which supersedes the public action. Also, why should they manipulate price upward or downward when the market may chastise them for such preemptory moves? You learn very quickly to let the market force you to do what is required by rule, but to avoid your actions based on your own knowledge.
If you try to rigorously support the claim that price is held to strike around expiration, you will find that the claim vanishes. The claim is the public patzer view that the big guys are robbing them blind because their wild greed isn't being rewarded. You can believe whatever myth that suites you, but know it has nothing to do with reality. |
