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Strategies & Market Trends : The Final Frontier - Online Remote Trading
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To: Daniel Goncharoff who wrote (4219)5/18/1998 4:23:00 PM
From: Robert Graham  Read Replies (1) of 12617
 
The bid and ask set by the MM is not a "theoretical price" as it may be with the MM on NASDAQ, even though they are supposed to have firm quote rules. The stock and the associated option has been moving in a trading range, so at any given time, my limit price will move between the bid and the ask. In the past, I have even set limit prices at the ask on option purchases not to get filled. This is the nature of the options market and the illiquid markets for stocks.

Illiquid instruments are open to games played by the MM in their attempt to manage their risk beyond that of their displayed quote. This can be seen on the more illiquid stocks of NASDAQ, the many of the preferred stocks of the listed exchange, and the relatively illiquid options market. This is business as usual and has been there since as long as I have followed the markets. Firm quotes are not necissarily honored in illiquid types of instruments. The minimum amount the firm quote on an option should transact is 5 contracts, from what I understand. If I use the electronic execution system, I would know immediately the results. If I transacted at the current market and timed this to my advantage, I would of received the price I was looking for.

I do not know what more I can add to this. I find myself going over remedial information for a person like yourself who appears to trade stock on a daily basis. You must understand the advantage of electonic execution systems like SOES and RAES. So I must not be understanding your question, and I do apologize for my misunderstanding.

Bob Graham
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