Leaderboard

I'm definitely not defending them in any way. But, I was a market maker in options, on the floors of 4 different exchanges for many years, and in order to do that job, especially for so many years, you REALLY have to have have a pretty sharp understanding of every nuance of options. But, even knowledge and experience is no guaranty that someone can produce profits in a retail setting. Especially in a situation like this. They probably made a lot of money ,month after month, as a market maker. But, you have understand the situation. That was at a time when there were still "floors" of exchanges, and you could either buy, or lease a seat on the exchange. By doing so, you were actually able to "buy edge". By virtue of being only among 100-200 people in the whole world who could trade in a "certain" way, it was very difficult to not make money. But, starting in 2002, the floors began closing, one by one, until there were no longer any left, and everything was now "electronic" trading. So, who knows how well, if at all, they were able to translate their "floor" experience into a "retail" environment, where they no longer can pay for "edge", and have to rely on their own expertise, and creativity in that world. Kim is right, they are different forms of trading that require different skill sets and approaches. On the floor, you don't decide on positions that you think are best to take, and then put them on. You have the advantage of being able to buy on the bid, and sell on the offer, while instantly hedging your delta to avoid that exposure. But, you have to accept positions that the order flow gives you, and very often you can wind up with big positions that you would never proactively put on as a strategic plan. One day the orders just keep coming in to sell OTM higher strike calls. So, you make a market that is low, and buy on the bid, while simultaneously selling the amount of deltas in stock. Then the broker comes back asking for a market for another 2500 calls, so you lower your market and have to buy your share of the next tranche of sales. You could wind up, as even a small trader, with long 3000 , 30 delta calls, and short the equivalent amount of stock to hedge the delta. Then the stock rises, and the calls stay the same, as IV goes down on the upside, and your short stock is killing you. That is one example of the price a market maker, in equities options, has to pay for the benefit of being able to buy on the bid, and sell on the ask all day long, while deciding the prices they will do it at. With "members" margins and commissions, there is almost no costs there. But, that world no longer exists.