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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: bazooka who wrote (3992)	12/18/1998 11:11:00 PM
From: Steven Bowen	Read Replies (1) \| Respond to of 4969

bazooka, "are mms and/or specialists obligated to buy my contract at their quote" I think the answer SHOULD be "yes, up to 10 contracts". However, I've gone round and round with ETrade over this. Especially in thinnly traded options or LEAPs. I've tried to buy at the ask or sell at their bid and it doesn't happen. What they'll often do (if I'm buying) is put me on the bid (at the old ask price) and raise the ask. ETrade always tells me; A quote on an option is just an indication of where the market may be. A market maker in an option is under no obligation to do a trade unless he can put both sides of a trade together. I think it's a bunch of BS, but I've seen it happen over and over. So I'd also be interested in what Steve says an option MM is obligated to do. Here's a couple responses I've received from ETrade on this exact topic; "Thank you for choosing ETRADE. I have checked Bloomberg for any activity for that contract and the system tells me the same as your findings, no trade activity. The question of why a listed price if no one really wants it is because the SEC regulations require us to list this price." "Your order to sell your options at 8 was not filled because nobody wanted to buy your options. When trading options, unlike trading stock, you need to have both sides of the transaction. A customer must want to buy the option and another must want to sell the same option. In this case you were willing to sell the option but nobody wanted to buy. There is no market maker willing to buy and sell out of there own inventory. The bid and the asks are simply indications of interest in the market, but are not firm prices. Even if you had entered a market order your still might not have sold the options unless someone else was willing to buy them." Steve, are they right, or did they flat out lie to me? Steve

To: bazooka who wrote (3992)	12/19/1998 9:10:00 AM
From: steve goldman	Read Replies (1) \| Respond to of 4969

Hi Bazooka, Let me say this...it would be my pleasure to discuss options. I am the Senior ROP, (Registered Options Principal), along with Bernie, for the firm, and consider myself fairly saavy in the use of options, complex positions etc. I think you find it less discussed because it is a less utilized product, just as we dont talk bonds up here, but lots of people make a living just trading those. To answer a few of your questions, Yamner & Co., Inc., is quite good at working options. We put the same, sincere diligent effort into the options as any other position. But no matter how good your execution systems, no matter how good your firm or broker, they are still options...highly volatile, wide spread, low liquidity, basically a tough product for a short term trader. 1. Do you have to close out on same exchange? No. You can buy on one and sell on another. Arbitrage....very rarely..only rarely does a market maker in an option fall asleep and miss the option quote on another exchange, but yes it could happen. Phila (x), Pcoast (p), Cboe (C), Amex (a) and one other trade options. one exchange is usually considered the primary exchange for the option, where all the big players are...in my experience, its usually the CBOE or Amex. Many of our clients do business with us solely for the quality of our options fills. But don't expect the same degree and speed of execution because they lack liquidity, are widely spread, and dont have the same number of execution systems as listed or otc stocks. Regards, Steve@yamner.com