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Secrets of a Market Maker
Presented by
Andrew KeeneSlide2
Disclaimer“
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.
http://keeneonthemarket.com/disclaimer/Slide3
James
Ramelli
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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, BloombergSlide4
Why Best Time Ever to Trade?
This is the BEST time ever to trade Options: Markets are Tighter
Penny WideMore Liquid Than EverSlide5
Market Maker Make $$$ on Bid-Offer Spread ?
A market maker is someone who is always quoting a bid-ask spread for a given option contract. The market maker is willing to take either side of the trade and is hoping to profit from the spread between the bid and offer.
Example: AAPL is trading at $530.00 The market maker makes a market for the Dec 550 calls at 25.00-25.30 20 up. This means that at this given time the market maker is willing to buy 20 contracts at $25 and/or sell 20 contracts at $25.30.
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Market Maker Makes $$$ 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. Slide7
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. Slide8
Is it That Easy to Become a Market Maker?
NO BC NO ONE CAN ME A MARKET MAKER ANYMORESlide9
Market Maker Secret
The Market Maker makes money off you, but you don’t even realize it.How do they make money from you:The Bid-Offer Spread
Implied Volatility ChangesTime Decay
They do NOT run stops though, but its time to FIGHT back against them and start taking their money.Slide10
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I will Teach you the Ways to Take Money from the Market Makers like Me, IT’S SIMPLE & PROFITABLE!!!!
Picture of YOUSlide11
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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.Slide12
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 straddleSlide13
Long Straddle
Trade:
Long Call, Long
Put, Same Strike
Advantages: Unlimited profit potential
Disadvantages: Expensive premium long
Max Risk: Premium paid
Max Reward: UnlimitedBreakeven: Strike price (+/-) the total purchase priceUse Straddles to My AdvantageSlide14
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. Slide15
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 $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 Slide16
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
How I decide What Trades to Take
The Trading Plan in Detail:Slide17
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 Ratio?
Its not Rest and Relaxation
The Trading Plan in Detail:Slide18
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
I love Tacos and
Tequilla
as well as Time & Targets
The Trading Plan in Detail:Slide19
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.Slide20
SPECIAL TOPIC COURSE:
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 Spreads
Learn when and why to Trade a Credit or Debit Spread
Learn how to Potentially Profit 600% in Options Using Market Maker Targets www.keeneonthemarket.com/marketmaker $97 Or CALL Us: 312-261-5581