Not an auction market?
"The Options Clearing Corporation is the sole issuer of all securities options listed at the CBOE, four other U.S. stock exchanges and the National Association of Securities Dealers, Inc. (NASD), and is the entity through which all CBOE option transactions are ultimately cleared. As the issuer of all options, OCC essentially takes the opposite side of every option traded. Because OCC basically becomes the buyer for every seller and the seller for every buyer, it allows options traders to buy and sell in a secondary market without having to find the original opposite party.
The OCC substantially reduces the credit risk aspect of trading securities options as the OCC requires that every buyer and every seller have a clearing member and that both sides of the transaction are matched.
What is a market-maker?
Market-makers provide liquidity in option trading by risking their own capital for personal trading, and are the backbone of the CBOE's trading system. They take the opposite side of public orders by competing in an open outcry auction market. Floor brokers, on the other hand, act only as agents, executing orders for public or firm
accounts.
Does a "specialist" buy and sell options?
Most option classes listed at the CBOE are traded in an open outcry system where certain members of the Exchange may trade as market-makers. Market-makers provide liquidity in option trading by risking their own capital for personal trading, and are the backbone of the CBOE's trading system. They take the opposite side of public
orders by competing in an open outcry auction market. This differs from the trading environment on many other exchanges where "specialists" are allowed to accept orders from the public, to manage the public order book and to deal for their own accounts in the same securities."
Because OCC basically becomes the buyer for every seller and the seller for every buyer, if Fred has an open position in his account of 5 contracts and Joe has an open position in his account of 5 contracts of the same series the open interest in the series is 10 whether both are writers, buyers, or one is writer and the other buyer.
But, I'm willing to admit that all I care about is that someone is paying me for the contracts I write!
Regards, Beachbumm |
