Option Buyers AND Sellers - WE ARE ALL TRAPPED!
P R Sundar・19 minutes read
Small fishes in the stock market are option buyers with limited capital, while medium-sized fishes are option writers who sell options, historically leading to losses for many option traders, with recent market shifts causing significant disruptions and losses. Large market players strategically manipulate the options market, prompting a call to boycott intraday trading to protect against financial losses and market manipulation.
Insights
- Small traders in the stock market often lose money due to purchasing put options, while larger traders profit by selling these options, reflecting the historical trend where 95% of participants, especially option buyers, face losses.
- Market manipulation by big players through strategic options trading, such as buying puts and selling calls in large volumes, has led to sudden market movements and losses for traders, emphasizing the need for caution and potentially avoiding intraday trading on certain stocks to mitigate risks.
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Recent questions
What is the relationship between small, medium, and big fishes in the stock market?
Small fishes are eaten by medium-sized fishes, and medium-sized fishes are consumed by big fishes, reflecting stock market dynamics.
What percentage of stock market participants historically lose money?
Historically, 95% of stock market participants, especially option buyers, lose money.
What recent market shifts have caused losses for option traders?
Recent market shifts have seen sudden and drastic movements, resulting in losses for many option traders, including proprietary accounts.
What strategy is involved in the US court case between Jan Street and Millennium Hedge Fund?
The US court case involves Jan Street accusing Millennium Hedge Fund of using a strategy developed by former Jan Street employees, leading to a 50% profit decline for Jan Street.
How do large market players manipulate options markets?
Large market players strategically manipulate options markets by buying puts and selling calls in significant quantities to influence market movements.
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Key Differences
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Summary
00:00
Stock market dynamics: small, medium, big fishes.
- In the sea, small fishes are eaten by medium-sized fishes, and medium-sized fishes are consumed by big fishes, mirroring the stock market dynamics.
- Small fishes in the stock market are option buyers with limited capital who anticipate market falls and purchase put options, while medium-sized fishes are option writers who sell options to these buyers.
- Historically, 95% of stock market participants, especially option buyers, lose money, with option sellers prevailing due to market movements.
- Recent market shifts have seen sudden and drastic movements, causing losses for many option traders, including proprietary accounts.
- A US court case involves Jan Street accusing Millennium Hedge Fund of using a strategy developed by former Jan Street employees, leading to a 50% profit decline for Jan Street.
- The strategy involves selling options, with one approach being intraday short straddles for smaller traders and selling far-out-of-the-money options for larger traders.
- A personal anecdote highlights the strategy of selling options with leverage, showcasing potential gains and risks, such as mistakenly trading futures instead of options.
- Large market players strategically manipulate options markets by buying puts and selling calls in significant quantities to influence market movements.
- The introduction of daily option expiries by exchanges has increased trading opportunities but also heightened the risk of market manipulation by big players.
- To maximize profits, large players execute strategic sell orders in key sectors like banking to influence market movements and profit from options and futures trading.
17:59
Market Manipulation: Safeguarding Against Financial Losses
- Two employees engaged in questionable activities, leading to legal action by Millennium and other hedge funds, causing frequent market disruptions.
- Selling large amounts of shares in a single order can crash the market, prompting genuine investors to sell in smaller increments to avoid price drops.
- Recent instances of rapid market declines indicate manipulative actions by operators, urging traders to boycott intraday trading to prevent further exploitation.
- Ceasing intraday trading, especially on midcap and Nifty stocks, can safeguard traders from potential financial losses and market manipulation, emphasizing the importance of individual responsibility in financial decisions.
