Understanding Liquidity and How Market Makers Trade

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Understand the other side of an options trade from the market maker's perspective to better understand your order execution. Many investors wonder about options liquidity and how they are sourced, learn valuable lessons that you can utilize to maximize your executions.
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#understandingliquidity #howmarketmakerstrade #liquidityexplained

Пікірлер: 71

  • @AM-yd5dt
    @AM-yd5dt3 жыл бұрын

    Great content Tony as always, enjoy listening to your wisdom and learning from it....

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    So happy to hear that! Glad it has been helpful!

  • @farhanalimahomed1399
    @farhanalimahomed13993 жыл бұрын

    I think this was one of your best chosen topics to discuss as retail investors like myself are definitely in the dark about some of these concepts. Thanks for doing this webinar.

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    Hi Farhan, absolutely! I am so glad I could help clarify this concept!

  • @glenn7791
    @glenn77913 жыл бұрын

    one of the more professional channels out there ( without clickbait titles and dumb faces) keep it that way cheers!

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    Glad to hear you are enjoying the channel!

  • @heldercristovao8255
    @heldercristovao82553 жыл бұрын

    First! Nice job on the liquidity explanation. It seems people misuse the term when looking at something with wide spreads. I’ve learned something today!

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    Thanks Helder, glad the content was helpful!

  • @redpillpharmacist
    @redpillpharmacist3 жыл бұрын

    Thank you, Tony! I am learning so much from you, and I wish I understood THIS basic concept from the start! You are a blessing to me!

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    Thank you for watching, glad to hear you found it helpful!

  • @ramudupa549
    @ramudupa5498 ай бұрын

    Superb content! Thank you for your easy-to-understand presentation.

  • @OptionsPlay

    @OptionsPlay

    7 ай бұрын

    Glad you found the content helpful. If you have any questions or topics you'd like me to cover, feel free to let me know. Appreciate your support!

  • @TEEHEE0209
    @TEEHEE02093 жыл бұрын

    Great video Tony! If I had one suggestion going forward, could you time stamp the video as per the listed agenda? It makes finding specific portions of the video a lot easier.

  • @cabbyw
    @cabbyw3 жыл бұрын

    Excellent option educational Webinar. Thank you, Tony !

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    Thanks for watching!

  • @mopill7188
    @mopill71883 жыл бұрын

    Thank you for the nice explanation!

  • @LongTu167
    @LongTu167 Жыл бұрын

    Many thanks Tony for such a insightful video!!!

  • @schedule
    @schedule3 жыл бұрын

    Very nice and clear webinar! It's always my pleasure to view Tony's tutorial!

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    Thank you, so happy to hear that!

  • @schedule

    @schedule

    3 жыл бұрын

    Yar, Tony, I don't know what is in you, but your voice and your attitude is very attracting to audiences. And I am one of them! Now I become your follower or perhaps Fans. Great Job! Looking forward to learn more from you again!

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    @@schedule I really appreciate all of your support, thanks!

  • @emcardleinvest
    @emcardleinvest Жыл бұрын

    Fantastic content. Sharing this with team/clients. Hope all is well.

  • @loreall.2461
    @loreall.246110 ай бұрын

    Great content, Tony. I’d really like to see a video with insight on how market makers price new options. Also I understand a market maker will also price options as an incentive to move a market given the risk on his book.

  • @samguru7776
    @samguru77763 жыл бұрын

    THANK YOU TONY!! Great content . I am a new follower.

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    Thanks Sam!

  • @leejmuam1
    @leejmuam12 жыл бұрын

    Great topic. I have no idea how it works but now understand.

  • @OptionsPlay

    @OptionsPlay

    2 жыл бұрын

    Happy to hear that!

  • @junkjunk2493
    @junkjunk24933 жыл бұрын

    thanks for your work tony this helps us all

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    Happy to hear that!

  • @torsnewbie249
    @torsnewbie2493 жыл бұрын

    Thank you, Tony for this Super Webinar!

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    Glad you enjoyed it!

  • @esjay3562
    @esjay3562 Жыл бұрын

    Very well explained and very informative!!

  • @OptionsPlay

    @OptionsPlay

    Жыл бұрын

    I'm glad you found the explanation informative!

  • @brendanquinn6894
    @brendanquinn6894 Жыл бұрын

    Excellent.

  • @atx5359
    @atx53593 жыл бұрын

    Good stuff 👏

  • @michaelmcguire2913
    @michaelmcguire29132 жыл бұрын

    Great video! Do the market makers look at theta and will they be more agressive to be positive theta? I dont think they can off set theta with shares like they do with delta, unless im mistaken

  • @justchilling_.
    @justchilling_. Жыл бұрын

    Great information 👍.

  • @MrBillybathgate5
    @MrBillybathgate5 Жыл бұрын

    Thanks you needed this

  • @vondagreat13
    @vondagreat132 жыл бұрын

    very helpful info thanks a lot

  • @OptionsPlay

    @OptionsPlay

    2 жыл бұрын

    Glad it was helpful!

  • @ajayjadhav6869
    @ajayjadhav686910 ай бұрын

    i should have foound this video before thaanks lot 👍

  • @MrClaudehammond
    @MrClaudehammond3 жыл бұрын

    Great explication!

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    Thanks!

  • @jameslim4525
    @jameslim45253 жыл бұрын

    Good stuff !

  • @OptionsPlay

    @OptionsPlay

    3 жыл бұрын

    Thanks James!

  • @joeko8253
    @joeko8253 Жыл бұрын

    so volume of the underlying determines liquidity of the options?

  • @chrism169
    @chrism1693 жыл бұрын

    Very informative as always Tony. Question for you - I notice sometimes that immediately after I place my order the bid or ask immediately jumps further away, seemingly as a result of my order. For example, B/A spread on a SPY put I wanted to buy to close was $0.02/$0.03; I put a buy order in at $0.02 and the Ask immediately jumped from $0.03 to $0.10. Can you explain this? Thanks

  • @coledigirolamo7347

    @coledigirolamo7347

    7 ай бұрын

    slippage!

  • @smsreferat
    @smsreferat2 жыл бұрын

    35:45 So you are saying that if I set my order to sell for 7.85 and you set an order to buy at 7.85 the market maker would not match them? How else the orders could be there?

  • @munster1404
    @munster14042 жыл бұрын

    I’m thinking about debit spreads in 0DTE SPX (cash settled) during situations of low volatility where selling options is not as profitable. A debit spread opened deep ITM and allowed to expired ITM will generate a profit equivalent to the spread after settlement. For example a debit of $4.50 paid for a 5 wide spread will, at expiry be worth a credit of $5 hence netting a profit $0.50 at EOD if the strike price is ITM. This strategy will seem viable if a credit spread gives significantly less than $0.50 for rote mechanical trades that advocate opening trades at 10 delta or less. But the problem with deep ITM options is the lack of open interest and volume. So if the market maker (MM) is out to facilitate trades, does this mean I should be able get a fill (if the ask/bid price is satisfactory) even if open interest and/or volume are at extremely low levels to zero?

  • @teretere9038
    @teretere90383 жыл бұрын

    Tony a question: when buying theses call writing ETF eg $SLVO silver Call write ETF ( no position ) if Silver where to spike eg $50 or $60 These ETF's now are Synthetic short uncovered hence volatility to the downside. noticed in March 2020 Call write ETF corrected very hard some maintained their distribution some did not. So they basically require a stable environment with range bound volatility correct ?

  • @user-yc6dc3yg1c
    @user-yc6dc3yg1c2 жыл бұрын

    Like your video! What do you think about these: 1. FX Liquidity does not matter whether it is from closing a long or short position, it can be taken by MM/banker/any trader to open as a long or short position. Is this statement true or false? Please advise with detailed educational advice. 2. Because FX is a zero sum game, if the liquidity is worth USD$10.01m it cannot be taken one cent more or less it must be digested exactly with the same amount by the MM/banker/any trader. Is this statement true or false?

  • @OptionsPlay

    @OptionsPlay

    2 жыл бұрын

    1.Generally speaking, that is true because of the depth of liquidity available in the currency markets, it is the largest market in the world. As a retail trader, you will never be able to use up all of the liquidity on either side of a MM/Bank’s liquidity so going long/short has the effect of unlimited liquidity to you as a retail trader. 2.I’m not sure I understand this question, if you could rephrase it, or give me a real example, I’m happy to try to answer it.

  • @LeonardWalter-tq5jt
    @LeonardWalter-tq5jt3 жыл бұрын

    Honestly it would really go a long way if you're able to share any means of helping people who need this sort of information to help them earn a few extra bucks

  • @tylerthongchai3187

    @tylerthongchai3187

    3 жыл бұрын

    Stocks are good crypto is better

  • @luisdetomaso867

    @luisdetomaso867

    Жыл бұрын

    @@tylerthongchai3187 Yes, stocks are down 20% and crypto is down 70%. Crypto is much better!

  • @MrBillybathgate5
    @MrBillybathgate5 Жыл бұрын

    Wow felt like I should have paid you for this video

  • @you0rsp1
    @you0rsp13 жыл бұрын

    Can somebody help me understand why if I buy a .53 delta call option the market maker would buy 53 shares of the underlying and not 100 shares since each contract is 100 shares?

  • @jovianblue

    @jovianblue

    2 жыл бұрын

    The price of the option will not change by a whole dollar if the price moves in that region, it will just change by about .53 so they just need to buy 53 shares. As the option becomes deeper ITM, they can just buy more shares or sell them if the price moves away from the option, and you'll see the delta increase or decrease, too. Maybe this could even explain a lot of the volatility and price swings in the market today because the market makers are buying and selling lots of shares based on increased option usage.

  • @thefuckingpearl

    @thefuckingpearl

    2 жыл бұрын

    Dude 0.53 delta would be hedged by buying 0.53×100=53 shares and not 100 shares. If the delta is 1 then it would be hedged by buying 1×100=100 shares , get it?

  • @iceycloud1
    @iceycloud1 Жыл бұрын

    Hey, I want to know if I put 1 million on a 0DTE on SPX, SPY, Or QQQ on one strike price are you telling me that I wouldn’t have liquidity issues? Tbh it’s very hard to find option traders that actually reply back lol

  • @olvinfuentes7514
    @olvinfuentes7514 Жыл бұрын

    18:00 does the market maker collect theta?

  • @mmolokikebosedilekae5689
    @mmolokikebosedilekae5689 Жыл бұрын

    its insane this video is from so long yet people are still misled

  • @toughbiblepassages9082
    @toughbiblepassages9082Ай бұрын

    this guy said “type yes or no in the chat” 1 million times before getting 10 minutes into this talk.. i bailed

  • @ClownTrader1
    @ClownTrader13 жыл бұрын

    So, dont worry about liquidity basically? Ever? No "liquidity" just means you need to pay a higher premium to trade?

  • @Chris-gz4ie
    @Chris-gz4ie2 жыл бұрын

    How do you become a market maker

  • @braden6992
    @braden69923 жыл бұрын

    Gosh this guy wastes time like a Boomer. I am a full 6 minutes in and he has yet to say anything other than what he plans to talk about. Doesn't he know this is KZread? Some options videos are over and done by this time ... forget this!

  • @kevinjohnson620

    @kevinjohnson620

    3 жыл бұрын

    Ok .I thought it’s a little drawn out too. But the information is there , so it is what it is.