>Firstly, I beleive the markets are efficient. If they are not, they will not >be able to survive.
Huh? What do you mean by efficiency? What do you mean by a market not surviving? IMHO, this is a nice-sounding, but empty, statement. Keep in mind that options skew everything, because they have no inherent value. While a stock means some piece of a company's buildings, equipment, intellectual property, etc, etc, and thus is subject to the normal supply-demand stuff, an option is just a euphemism for a BET. If MM's only dealt in stocks, then they would have no reason to attempt to alter the price of a stock, as it would cut into their profits. But options are SIDE BETS -- now imagine that Ford Motor Co had placed a huge bet with someone on the market price of a 1996 Ford Taurus on February 22, 1996. Are you saying that because of the "efficiency" of markets, Ford would not attempt to dump some Tauruses around that time to lower the price?
>Secondly MM's are not a homogenous group of people who sit on >the same side of the fence with same interests all the time,
this is true. and i don't see why we only discuss possible manipulation by mm's. i think big shareholders (mutual funds? who knows) are just as capable of doing it. but when the interest is so hugely skewed toward one side, as it was toward calls of certain strike prices in the case of january intel options, there arises some degree of homogeneity, wouldn't you agree?
>Thirdly, the MM' s do not take a directional risk, because it goes >against the viability of their business intersts.
i can't vouch for or against this one at all. but big shareholders do, by definition, take directional risks.
i'm not implicating anyone in price manipulation. all i'm saying is that it certainly COULD happen. |
