stock/option trading Application.
Trading By Leveraging Market Maker’s Positioning
Using first order Greeks – Delta / Theta / Vega
Second order Greeks - Gamma / Vanna / Charm Exposure
Third order Greeks - Speed
Open Interest / Implied Volatility
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Whenever a trade is executed, the Market Maker invariably takes the opposite position. For example, if a trader acquires a call option with a 0.35 delta, anticipating a rise in the underlying price, the Market Maker sells that call to the trader. To manage risk, the Market Maker hedges by purchasing 35 shares.
In situations where Market Makers find themselves short on these calls and the price escalates, resulting in losses, they step in by acquiring shares of the underlying asset. This substantial buying often involves millions of shares, enabling them to offset losses from short calls with profits from long shares, achieving delta neutrality. Market Makers leverage bid-ask spreads for profit generation.
In a typical stock market scenario, consider Mr. John, overseeing a $5 billion retirement or 401K fund. Fearing a potential market decline, he acquires puts to protect his portfolio. However, this safeguarding comes at a cost. To boost profits, he sells covered calls, generating additional income. Consequently, the world tends to be long on puts and short on calls.
Hence, Market Makers typically find themselves short on puts and long on calls.
Amidst the fluctuations in the values of underlying assets, the actions of market makers buying or selling assets directly impact the underlying shares. Utilizing Gamma exposure (GEX), Vanna exposure (VEX), and Charm exposure (CEX) aids in identifying support and resistance levels for these underlying assets. I used Black-Scholes-Merton (BSM) model for calculating these vital metrics. Using these key levels, achieved a profit of $117,890 last year, despite being a relatively inactive trader.
Currently the application is operational from 8:15 am (EST) to 7:00 pm (EST).
http://secondderivativeshub.com/
Should you perceive value and wish to engage in conversation and discussion, I am open to it.
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