Secrets of a Market Maker

Secrets of a Market Maker
Presented by
Andrew Keene
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trading system or methodology is not necessarily indicative of future results.
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James Ramelli
- 23 Years Old and I have Doubled my Trading Account from
Learning Andrew Keene’s Teaching Ways
- Trade full-time
- Have Taught 1000’s of Students to Full Time Traders
- Regular Contributor to CNBC,
CBOE, Bloomberg
Why Best Time Ever to Trade?
This is the BEST time ever to trade Options:
1. Markets are Tighter
2. Penny Wide
3. More Liquid Than Ever
Market Maker Make $$$ on Bid-Offer Spread ?
A market maker is someone who is always quoting a bid-ask spread for
a given option contract. The market maker is willing to take either side
of the trade and is hoping to profit from the spread between the bid
and offer.
Example: AAPL is trading at $530.00
The market maker makes a market for the Dec 550 calls at 25.00-25.30
20 up. This means that at this given time the market maker is willing to
buy 20 contracts at $25 and/or sell 20 contracts at $25.30.
Market Maker Makes $$$ on Implied Volatility
Think about the market makers inventory like you would a jersey store.
Its all about inventory in and inventory out. The store owner will keep
the store well stocked with the “hot” names. Lebron James is a popular
name and will always sell out. Since these names are more popular the
store owner knows there is a bigger demand for them. He also knows
he needs to be more competitive in his pricing.
The market maker operates the same way. Stocks that are heavily
traded will have a tighter market and more quantity available. AAPL
and FB are the Lebron jerseys of options.
Market Maker Makes $$$ on Time Decay
Time Decay:
Think about options like an insurance policy that you buy. You may pay
your car insurance premiums once a month but you are really paying
them a little every day. Options are the same way.
Returning to the previous example the market maker who sold the
trader those APPL calls also profits from time decay.
The option trader who bought those calls paid all of the premium up
front but the options will decay a little everyday. As the market maker is
delta neutral they are profiting on this time decay.
Is it That Easy to Become a Market Maker?
Market Maker Secret
The Market Maker makes money off you, but you don’t
even realize it.
How do they make money from you:
1. The Bid-Offer Spread
2. Implied Volatility Changes
3. Time Decay
They do NOT run stops though, but its time to FIGHT back
against them and start taking their money.
I will Teach you the Ways to Take Money from the Market Makers like Me, IT’S SIMPLE & PROFITABLE!!!!
Picture of YOU
I learned these Secrets from a Market Maker, but I am here
to share them with you.
I have always wanted to be a market maker my whole life,
but it doesn’t exist anymore
Now I am a market taker and make more money than I ever
have before.
Using the Market Maker Targets
How to Use the Market Makers Targets:
How do you develop price targets? Many use technical indicators like fib
levels or wave patterns but there is a much more accurate and efficient
method for doing this.
We can use the options market to calculate how much of a move the
market maker is pricing into the options.
We use this by calculating the measured move target using the at the
money straddle
Use Straddles to My Advantage
Long Straddle
Trade: Long Call, Long Put, Same Strike
Advantages: Unlimited profit potential
Disadvantages: Expensive premium long
Max Risk: Premium paid
Max Reward: Unlimited
Breakeven: Strike price (+/-) the total purchase price
Market Makers Target
How to Use the Market Makers Targets:
Once we know the straddle price we can calculate targets
Upside target: Straddle price plus strike price
Downside target: Strike price minus straddle price
In general the short the time to expiration the more accurate these
targets are. A trader can use this method in any option product for any
catalyst event.
Lets Look at an Example in AA:
How to Use the Market Makers Targets:
Example: Alcoa (AA) is reporting earnings. The stock is trading around
The Apr Weekly 12.5 Straddle is trading at $0.70
Upside target: $13.20
Downside Target: $11.80
Using the these targets rather than technically projected targets is much
more accurate. Knowing them also helps a trader identify key levels. This
is a trick employed by market makers all the time
How I decide What Trades to Take
The Trading Plan in Detail:
O: Open Interest: Volume vs. Open Interest Institutional Market Memory
C: Chart: Bullish, Bearish or Neutral?
- Strength of trend into earnings. Gap Points?
Support Resistance? Trend is Your Friend
Its not Rest and Relaxation
The Trading Plan in Detail:
R: Risk: How much of Total Book or Dollar Amount am
I willing to lose.
- Not swinging for the fences, Never more than 5%
of Book
R: Reward: How much do I want to make on this Trade?
- What’s a minimum acceptable Risk / Reward
I love Tacos and Tequilla as well as Time & Targets
The Trading Plan in Detail:
T: Time: When do I think this will happen?
- Time is Money...Know when the Trade is over
T: Target: Where will I take profits, scratch trades or
stop out…
-Stick to the plan, Control Risk First, Manage Profits
We Need to Fight Back NOW
Remember that in order for the market maker to keep
making money they need customers. I will teach you the
ways to start taking money back from the market maker.
The market maker isn’t concerned with running your stops
or squeezing you out of a position.
We can beat them at their own tricks and I will teach you
How to Take Money
from the Market Makers
 Use Call-Put Ratio to Determine Investor Sentiment
 Use the Market Makers Target for Iron Condors
 Learn Best Time of Day and Week to Trade Credit and Debit
 Learn when and why to Trade a Credit or Debit Spread
 Learn how to Potentially Profit 600% in Options Using Market
Maker Targets
Or CALL Us: 312-261-5581
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