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Strategies & Market Trends : From the Trading Desk

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To: steve goldman who wrote (1899)	12/5/1997 10:20:00 AM
From: Steven Bowen	Read Replies (1) of 4969

Steve, following up on NukeIt's option question, could you give a short primer on how options are traded? ie traded using a market maker system just like the NASDAQ stocks? - if so, is it the same MM's usually making the market in the stock? - will MM's go short (naked) options to meet buy offers or are all buys only filled when someone else wants to write a covered call? Volume on most options are usually so low, it's just hard to see how the MM's can ensure a market. On the side, I get ALOT of price improvements on option orders thru E*Trade when it doesn't look like I should (but I'm not complaining, I'll take them). For instance this morning an option was bidding 3/8, asking 9/16. By the time I put a limit order in to buy at 1/2, the stock actually upticked. Within a minute or so I got confirmation back that they filled my order at 7/16. Totally unexpected. Do you have an explanation why improvements like this happen fairly often? Thanks for your efforts, Steve

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