Greg,
I've heard for some time how the market makers take a stock down to the strike, the most likely in this case 22 and 1/2. How exactly does that occur? When a stock shows some upward pressure (100 by 10), do MMs come in and sell shares at the bid price (what a seller can get for the stock), pocketing the spread, and stemming a possible rally. Or 1et's say it's expiration week, the spread is 10 by 10 and stock is 23 bid (what the seller gets) by 23 and 1/8 ask (what the buyer pays for the stock), do they make a lot of shares available at the 23 and 1/8 price to make sure that price stays at that level or lower. In both cases, do they own the stock they are selling or do they borrow from clients?
If they borrow the shares, do they buy them back in the after market offsetting any losses on those transactions by the spread(s)they earned on the sale of stock they didn't own.
Now if all the above sounds ignorant, it's because I know very little about how the system operates. Please straighten out my thinking or refer me to a book where I can read about the duplicitous dealings of market makers. |
