Presentation on theme: "Secrets of a Market Maker"— Presentation transcript:
1Secrets of a Market Maker Presented by Andrew Keene
2Disclaimer“KeeneontheMarket.com” (“KOTM”) is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of KOTM are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory. IMPORTANT NOTICE! No representation is being made that the use of this strategy or any system or trading methodology will generate profits. Past performance is not necessarily indicative of future results. There is substantial risk of loss associated with trading securities and options on equities. Only risk capital should be used to trade. Trading securities is not suitable for everyone. Disclaimer: Futures, Options, and Currency trading all have large potential rewards, but they also have large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don’t trade with money you can’t afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures, options, or currencies. No representation is being made that any individual, group, or entity will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. Visit our website below to read the full disclaimer.
3James Ramelli Years Old and I have Doubled my Trading Account from Learning Andrew Keene’s Teaching Ways- Trade full-timeHave Taught 1000’s of Students to Full Time TradersRegular Contributor to CNBC, CBOE, Bloomberg
4Why Best Time Ever to Trade? This is the BEST time ever to trade Options:Markets are TighterPenny WideMore Liquid Than Ever
5Market Maker Make $$$ on Bid-Offer Spread ? A market maker is someone who is always quoting a bid-ask spread for a given option contract. The market maker is willing to take either side of the trade and is hoping to profit from the spread between the bid and offer. Example: AAPL is trading at $ The market maker makes a market for the Dec 550 calls at up. This means that at this given time the market maker is willing to buy 20 contracts at $25 and/or sell 20 contracts at $25.30.
6Market Maker Makes $$$ 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.
7Market 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.
8Is it That Easy to Become a Market Maker? NO BC NO ONE CAN ME A MARKET MAKER ANYMORE
9Market Maker SecretThe Market Maker makes money off you, but you don’t even realize it.How do they make money from you:The Bid-Offer SpreadImplied Volatility ChangesTime DecayThey do NOT run stops though, but its time to FIGHT back against them and start taking their money.
10I will Teach you the Ways to Take Money from the Market Makers like Me, IT’S SIMPLE & PROFITABLE!!!! Picture of YOU
11I 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 anymoreNow I am a market taker and make more money than I ever have before.
12Using 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
13Use Straddles to My Advantage Long StraddleTrade: Long Call, Long Put, Same StrikeAdvantages: Unlimited profit potentialDisadvantages: Expensive premium longMax Risk: Premium paidMax Reward: UnlimitedBreakeven: Strike price (+/-) the total purchase price
14Market Makers TargetHow 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.
15Lets Look at an Example in AA: How to Use the Market Makers Targets: Example: Alcoa (AA) is reporting earnings. The stock is trading around $12.50 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
16How I decide What Trades to Take The Trading Plan in Detail:O: Open Interest: Volume vs. Open Interest - Institutional Market MemoryC: Chart: Bullish, Bearish or Neutral?- Strength of trend into earnings. Gap Points? Support Resistance? Trend is Your Friend
17Its 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 BookR: Reward: How much do I want to make on this Trade?- What’s a minimum acceptable Risk / Reward Ratio?
18I 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 overT: Target: Where will I take profits, scratch trades or stop out…-Stick to the plan, Control Risk First, Manage Profits Second
19We 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.
20SPECIAL TOPIC COURSE: How to Take Money from the Market Makers Use Call-Put Ratio to Determine Investor SentimentUse the Market Makers Target for Iron CondorsLearn Best Time of Day and Week to Trade Credit and Debit SpreadsLearn when and why to Trade a Credit or Debit SpreadLearn how to Potentially Profit 600% in Options Using Market Maker Targets$97Or CALL Us: