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Strategies & Market Trends : Level II Trading -- Ignore unavailable to you. Want to Upgrade?

To: ExCane who wrote (89)	2/6/1998 6:58:00 AM
From: Edward Ip	Read Replies (1) \| Respond to of 1086

By the way, does anyone know a good broker that trades on the instinet,and while you are at it, any good quoting service that offers after market quotes. Ip

To: ExCane who wrote (89)	2/7/1998 4:31:00 AM
From: Robert Graham	Read Replies (1) \| Respond to of 1086

Cramer definitely does not know all. He can be at times very misleading in his articles for some strange reason. I think he must know better. For instance on his description of options and expiration. He made it out that the MMs are taking the stock traders on a roller coaster ride by using expiring options as "free"shorts, like this really makes sense. Since when will an option even with no time premium give a trader a "free" short? It can provide a more inexpensive hedge to a short, but there is risk still incurred since this likely is not a perfect hedge and the cost of comissions on both the stock and option, and possibly the cost by how much the option is actually in-the-money. This is not considering the risk playing this strategy for the intraday trade it needs to be on option expiration day. Seems to me to be a game only for the floor traders to play. He fails to mention the single aspect of this scenario that is of prime importance in the option expiration process, that the MM needs to short the stock in order to hedge his position in taking the other side of the option trade when the speculators move out of their option positions. IMO this activity alone can have the stock close at a strike price of an option that has a large open interest that day. This "tidbit" was not mentioned at all even though it probably represents most of the cause that option expiration can cause stock to behave this way. So he gave a distorted view of options expiration in his efforts to call to issue the shorting activity that occurs that day. I have seen this approach by him in several articles he has written for his online newsletter. Also, what about the arbitrage that can occur during that time since the option can sell at a discount to its intrinsic value on that day? How about the hedging activity by the delta neutral option traders and other hedging or arbitage effects that can impact the price of the underlying stock? Once Cramer starts on an "issue", beware of his distortion of reality and his wandering and at times pointless prose. He ends up being very different from his persona on television. As far as MM manipulation goes, this has been very well documented on the NASDAQ and SEC web sites, along with articles from magazines of good repute like Forbes which predated the results of SEC investigations that fully support what was covered in the Forbes magazine article. IMO NASDAQ was set up to be run like a racket. And then you have the NASD made up of representatives from the different MM firms? I cannot take this arrangement seriously, particularly considering the results, and the evidence the SEC has reported on to show that the NASD has a history of failing to pursue allegations and evidence brought to their attention. But also I think it is important to understand that by far not all MMs and market making activity is handled irresponsibly and unethically. Furthermore, you as the trader still need to deal with it, and there are ways to insulate yourself from much if not most of this activity. This is part of the reality that is there to deal with or avoid when you trade NASDAQ stocks, the potential cost of trading on NASDAQ. Also, I suspect that if many of the same traders who complain were to find themselves on the other side of the fence with millions of dollars at stake probably would find themselves acting in a similar fashion to protect their capital. It is just that some MMs take their self-interest to an extreme and move from that "grey area" to black and white illegal activity. What about those SOES bandits that place in false bids and then quickly cancel them. How is this helping the other traders? The pursuit of self-interest abounds on both sides of the fence even though the actions by the MMs do have a much more significant impact on traders. Some people here should really look at the reports available on the SEC web site regarding this issue of MM manipulation. I am sure it will be an eye opener to them. To trade on NASDAQ and remain in the dark about the games MMs play is not only naive but IMO also irresponsible to your own financial well-being. How about discussing what to look for in how MMs fake out the traders when they want to purchase or sell large blocks of stock? This is like a poker game and the MMs rarely reveal their "hand". Also can someone go over what they see on a Level II in terms of how the MMs position themselves from bid to ask as they aquire and dump shares? What simple "rules of thumb" can a person use who is watching this tell when the price is likely to move up or down? If I were to spend $$ for one month of access to a Level II screen, what particular types of activity can I look for to help aquaint myself with some of the machinations of the MMs? Just my thoughts on the subject. Bob Graham