CTC,
You state, From whence commeth these additional buy or sell orders?
You suggest the orders come from fundamentalists buying and selling as target prices are reached. Possibly but not necessarily. The essence of momentum trading is to jump on something that is moving, in itself a sort of self-fulfilling prophesy. That short term demand can certainly move the stock up. If the same traders sell over a longer period of time, you get a tidal action.
Options I gave as an example of a true zero sum game. Someone buys the option, someone writes the option. Assuming the option market maker is delta neutral, the movement of the underlying issue impacts the buyer and writer precisely inversely--one wins, one loses, a zero sum game. (BTW, this is obviously true whether the option has 6 months or 6 days to its expiration). If every long purchase of a stock required a matching short sale (which it obviously doesn't), stock would be a zero sum game.
When you commented on Voltaire's argument about MM manipulation, I assume you meant the Voltaire on this thread not the real Voltaire, who himself could be considered a manipulative market maker. When the real Voltaire was about 21 he was smart enough to go around Paris and buy up all the Paris city bonds he could find. Everyone thought the city was about to default and sold the bonds cheap. To maintain its credit, the city paid off at face value. This gave Voltaire the independence he needed to become, well, Voltaire. Il faut cultiver notre jardin, comme il dit.
Best,
--Steve |
