1. Could u expand on MMs using and loving vertical spreads for hedging purposes? I love my verticals as speculative plays so curious.
2. Isn't part of reason why MMs don't goose up premiums their not wanting to kill the golden goose (sorry lame pun). They want this gamma squeeze and the monster volume that goes with it to go on forever. They're making $$ hand over fist rn, aren't they?
1. Option MM 101: You can only hedge options with other options. Delta hedges are locally effective but are linear hedges and fail if the stock gaps. To offset gammas and vegas you need to spread options against each other.
2. I can't speak to MM's explicit strategies or performance. They are trying to make profits, and how they balance the short term and long term considerations to that end is their own matter.
Really nice article about how options affect the market. People need to learn that the market makers try and hedge away the risk as much as possible. Sometimes they miss but mostly they have steady gains/profits.
Awesome stuff Kris. 🙏🙏
I have 2 questions:
1. Could u expand on MMs using and loving vertical spreads for hedging purposes? I love my verticals as speculative plays so curious.
2. Isn't part of reason why MMs don't goose up premiums their not wanting to kill the golden goose (sorry lame pun). They want this gamma squeeze and the monster volume that goes with it to go on forever. They're making $$ hand over fist rn, aren't they?
1. Option MM 101: You can only hedge options with other options. Delta hedges are locally effective but are linear hedges and fail if the stock gaps. To offset gammas and vegas you need to spread options against each other.
2. I can't speak to MM's explicit strategies or performance. They are trying to make profits, and how they balance the short term and long term considerations to that end is their own matter.
Really nice article about how options affect the market. People need to learn that the market makers try and hedge away the risk as much as possible. Sometimes they miss but mostly they have steady gains/profits.