Explain the mechanism. If I opened on one market maker, how can I now close on another market maker? - page 3
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The price of the asset is determined by the base currency of the deposit. And yes, I was a little wrong in my previous answer. It is not a futures contract, but an option. You buy a long range option with an expiration time of up to six months. One at a lower long strike and one at an upper long strike and you sell them out within six months to your clients. I admit I don't have much experience with options trading, but I get the idea. That's how you become a market maker, when you can be a buyer and a seller at the same time. It's called spread trading, if I'm not mistaken, which is what MMs do.
An option is also a standardised type of stock exchange contract.
How do you sell it out in parts?
An option is also a standardised type of stock exchange contract.
How do you sell it out in parts?
Within the company, easily. Of course, the accumulation of aggregate positions takes place when you put them on the exchange. In other words, during the day you accumulate a more or less large position and work it off on the exchange. What did not fit under the minimum volume is transferred to tomorrow, etc.
And how will you close it?
A unified stock exchange contract in $50-$10 installments?
And how will you close it?
A unified stock exchange contract in $50-$10 installments?
That's what I say, first you accumulate a larger position, then you put it on the stock exchange. You can work with leverage. You do not care if you draw figures for your clients. The main thing is not to outline yourself, but I'm sure the brokerage companies have tons of all sorts of checks on this. Again, it's all in my side of the story.
Accumulated a total of one option contract on one pair, bought the contract on the exchange.
Customers have started to close their positions gradually - how does the option hedge the OC's position?
Does the brokerage company wait for the option to expire?
Does JC exercise the contract before maturity? When?
Accumulated a total of one option contract on one pair, bought the contract on the exchange.
Customers have started to close their positions gradually - how does the option hedge the OC's position?
Does the brokerage company wait for the option to expire?
Does JC exercise the contract before maturity? When?
It is not a bit like that. You put money in and immediately buy two options with long expiry times and long strike options. You end up with two positions, and then you sell them out using the nearest futures. Option+ Futures = SPOT
I don't know the exact details of this scheme, but I do know that there is a strategy called spread trading, which is what the Markets do. Either they buy long futures and sell short futures or they do it using options. Here is a link, have a look at it. It's called the calendar spread. This is when there is a difference in price between the far and near futures.
That's not quite right. You put money in and immediately buy two options with long-dated expiry times and long-dated strikes. You end up with two positions, and then you start selling them out using the nearest futures. Option+ Futures = SPOT.
I don't know exactly the details of this scheme, but I do know that there is such a strategy and it is called spread trading, which is what Markets actually do. Either they buy distant futures, and sell out to short ones, or they do it using options. Here is a link, have a look at it. It's called the calendar spread. This is when there is a difference in price between the far and near futures.
Again nothing is clear.
Once again I ask what to do with the split of a consolidated position?
Both option and futures are standardised exchange contracts. They have a standard minimum size.
ACCORDING to this, the BC has accumulated many small orders for one asset in one direction and has bought an option.
What do we do when clients begin to lock in their positions?
There are no futures contracts of $50-100-200.
Again nothing is clear.
Once again I ask - what about the split of the consolidated position?
Both option and futures are standardised exchange contracts. They have a standard minimum size.
ACCORDING to this, the BC has accumulated many small orders for one asset in one direction and has bought an option.
What do we do when clients begin to lock in their positions?
There are no futures contracts of $50-100-200.
I think this raises the issue of internal liquidity. To start with, we put our own together, and in case of a large misalignment, we insure with a real exchange option. Obviously, it is important to have a skew in the volume of the minimum option contract. But that only applies to the kitchen. It is not likely that anyone will take the 200 quid out of the dealership alone. But in the case of a large number of clients the aggregate position can be more than one million. And with those positions, there's room for manoeuvre. No matter how you look at it, they will still accumulate your 200 quid.
I think this raises the question of internal liquidity. To begin with we put our own between us, and in case of a large misalignment we insure with a real exchange option. Obviously, the difference has to be in the volume of the minimum option contract. But that only applies to the kitchen. It is not likely that anyone will take the 200 quid out of the dealership alone. But in the case of a large number of clients the aggregate position can be more than one million. And with those positions, there's room for manoeuvre. No matter how you look at it, they will still accumulate your 200 quid.
Well, let's say.
The client closed his position of 200 quid and the brokerage company closed it with internal reserves.
But the option remains open for the full amount - this difference of 200 quid is the risk borne by the brokerage company - this is the brokerage company's position, not the client's. And with gradual closing of client's positions the risk of BC in the option will increase.
And at the end?
The brokerage company has the option for $1 million and the last client's one bet of $100?
Well, let's say.
The client closed his position of 200 quid and the brokerage company closed it with internal reserves.
But the option remains open for the full amount - the difference of 200 quid is the risk borne by the brokerage company - this is the brokerage company's position, not the client's. And with gradual closing of client's positions the risk of BC in the option will increase.
And at the end?
The brokerage company has an option for $1 million and one bet of the last client of $100?