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Technology Stocks : Echelon Corporation (ELON)
ELON 21.88+10.1%Oct 6 5:00 PM EST
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To: tuck who wrote (2341)6/16/2000 11:22:00 AM
From: ahhaha  Read Replies (1) of 3076
 
We were talking about what market makers do. You can't do what they do because you don't get the margin,you have commissions, and you aren't nearby to take advantage of short term misalignment.

You don't seem to understand that the default nature of markets is efficient. Since you don't know what efficient means, why try to imply that it isn't valid? It is the function of market makers to make them efficient by seeking delta neutral. You are implying that the market makers aren't pursuing their own greedy interests by doing exactly that. The desire to profit makes the market maker seek actions which make the market efficient.

There no good ways to hedge. All hedging is losing unless you are performing the perfunctory role of a market maker by getting on the other side of the public action. It loses because the returns are so discouraging that eventually you get manipulated by your own state of mind into taking risk which you no longer can assess having been protected in the cocoon of hedging.

I told one of the previous posters who was a tyro and apparently engaged in call writing that no one should be involved with options. I meant that no one should be involved with hedging and in particular, call writing because it induces a psychology where you end up buying options naked.

Assume this psychology doesn't arise. Why write calls against long? You're betting that you're wrong. You are in the stock presumably to realize superior gains and you are willing to engage risk to accomplish that end. So why implement a pseudo-bond strategy? The answer is it's a secret way to exercise greed. When it works you are emboldened to go naked and then you enter the path to ruin.
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