How to trade options as options market maker or like options market maker?

I've read the only book available - "Option Market Making" by Allen Jan Baird, but it did not help me much. Any practical ideas how to do market making? Any software for this purpose?

Any way to learn it? Asked by gldgate 52 months ago Similar questions: trade options market maker Business > Financial Planning.

Similar questions: trade options market maker.

Options trading is among the riskiest of ventures. Billions have been lost in seconds. If you like to gamble, go to Las Vegas, at least there you get free drinks.

1 I left senior engineer job as 4.5 years ago and good living from financial markets since. Options are not gamble. Options allow to pick your own risk.

Easy, first on my mind example: what is the gamble if I buy stock XYZ at $49 and sell for $7 call with strike price $45. My risk is less than for owner of stock : I can lose maximum $4200. Owner of the stock can lose maximum $4900.

If stock don't go below $42 I will win. And my annualized return (monthly return X12) will likely be quite large if stock don't lose 14% in a month. I can even give you examples that I make money if stocks don't lose 50%.

My questions is not about risk - you can magnify or reduce risk substantially. My question is how to do it as a market maker. Consistently.

Almost as income. And, while I don't know anybody in person, there are many market makers and market maker firms doing it.

I left senior engineer job as 4.5 years ago and good living from financial markets since. Options are not gamble. Options allow to pick your own risk.

Easy, first on my mind example: what is the gamble if I buy stock XYZ at $49 and sell for $7 call with strike price $45. My risk is less than for owner of stock : I can lose maximum $4200. Owner of the stock can lose maximum $4900.

If stock don't go below $42 I will win. And my annualized return (monthly return X12) will likely be quite large if stock don't lose 14% in a month. I can even give you examples that I make money if stocks don't lose 50%.

My questions is not about risk - you can magnify or reduce risk substantially. My question is how to do it as a market maker. Consistently.

Almost as income. And, while I don't know anybody in person, there are many market makers and market maker firms doing it.

2 If you own stocks, selling calls to boost your return is a great idea. The problem with most people is that options are not that easy to understand, and because of that they look riskier. And they are right: the unknown is risky.In fact, one should never play options until fully understands the mechanics and paper trade for a while to be sure understood it all.

If you are seasoned in options, try this: Sell naked options 10 days before expiration. Look for cheap stock with juicy option premiums.My favorite move nowadays is look for a stock that crashed hard in the last days. Then I sell puts.

In the last 10 days of life, the put option will be very juicy and the time decay will work for you big time. Within the next 8 days, even if nothing happens, you will make maney. Look for high thetas, and be sure there are no special events during these days (such as earning calls).

This strategy, of course, will require more margin, and theoretically, your potential loss is much much bigger than your potential return. But the key is that the odds of having the small return are much bigger than your potential big loss. And here, you are in the side of the market makers.

Have you tried the book "Option Volatility & Pricing: Advanced Trading..." by Sheldon Natenberg? Maybe this is what you are looking for. Good luck.

If you own stocks, selling calls to boost your return is a great idea. The problem with most people is that options are not that easy to understand, and because of that they look riskier. And they are right: the unknown is risky.In fact, one should never play options until fully understands the mechanics and paper trade for a while to be sure understood it all.

If you are seasoned in options, try this: Sell naked options 10 days before expiration. Look for cheap stock with juicy option premiums.My favorite move nowadays is look for a stock that crashed hard in the last days. Then I sell puts.

In the last 10 days of life, the put option will be very juicy and the time decay will work for you big time. Within the next 8 days, even if nothing happens, you will make maney. Look for high thetas, and be sure there are no special events during these days (such as earning calls).

This strategy, of course, will require more margin, and theoretically, your potential loss is much much bigger than your potential return. But the key is that the odds of having the small return are much bigger than your potential big loss. And here, you are in the side of the market makers.

Have you tried the book "Option Volatility & Pricing: Advanced Trading..." by Sheldon Natenberg? Maybe this is what you are looking for. Good luck.

Free sources of historical financial data - market indices, etc.

I cant really gove you an answer,but what I can give you is a way to a solution, that is you have to find the anglde that you relate to or peaks your interest. A good paper is one that people get drawn into because it reaches them ln some way.As for me WW11 to me, I think of the holocaust and the effect it had on the survivors, their families and those who stood by and did nothing until it was too late.