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Originally Posted by TheFrenzy
Honest question: To what extent are the fluctuations that you are attempting to capitalize on based in changes in real-world assets and corporate developments and to what extent are they based on the excesses of human emotion and algorithmic blind spots?
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Quote:
Originally Posted by ajlaxmn
IMO, and Blazed is the better one to answer, a significant portion is based on human emotion and algorithms. That is just based on what I've learned and things Blazed has said.
Blazed, from what I understand the underlying securities that an option contract represents is moved based on the value of the options not the actually security? I think I learned that watching a video on YouTube for a channel called Project Finance, I may have heard that incorrectly or maybe you said it? I don't want to put words in your mouth and if what I said is wrong I'll throw it in the trash.
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That's correct.
Options are moving the market, not the other way around. This is a market maker market right now, most retail traders don't understand how options can move markets via delta hedging by the big boys (market makers, banks, dealers).
If you want to see it in action, watch the options contracts on SPX during the last 10 min of the trading session. Dealer hedging and MOC's rebalancing final hedges of the day. Huge volume all done by software. Contracts can go from $40 ---> $2000+ in 5 - 10 mins. Not every day, but on days they decide to pump or dump with huge volume. Some days they close the session flat, just depends on their hedges for the day/week.