Where's the MM?

[GreatPig]

At 3:30pm today, this is the market depth for the put warrant LHGWOR.

Where's the market maker (CTI)? Aren't they supposed to be ensuring a market for the warrants? I saw them there this morning, with bid/offer at 16 and 16.5 cents, but they've gone now.

LHG is still trading as best I can tell.

Cheers,
GP

 

[GreatPig]

Okay, now a few minutes later they're back again. However, there was at least 5 minutes I saw when there was nothing.

How long typically does this sort of thing happen for? I could see this potentially being a problem if the market maker disappeared just at a critical time when you needed to sell.

GP

 

[happytrader]

Hi GreatPig

Same thing happened to me. There I was looking at my offer on screen and no bidder on the other side. Maybe they were out to lunch or playing me. I don't know and I don't care. I had to lower my price to attract a buyer because I had an exit signal. It only happened once but it made me find instruments with a lot more open interest.

Cheers
Happytrader

 

[sails]

GreatPig, I have been led to believe that the warrant issuers pretty much set their own rules and don't have the same obligations as option market makers.

I went to the Brisbane trader's expo last week and was speaking to a guy there representing Citigroup warrants. One thing he said was to give them a call if in need of any information - so perhaps if it happens again, try them out with a phone call.

 

[GreatPig]

I have been led to believe that the warrant issuers pretty much set their own rules and don't have the same obligations as option market makers.

Thanks.

I know they're not covered by the same rules as options MMs, but I was still under the impression that they were obligated to make a market in the warrants, which I would have thought meant at least having a buy bid in whenever no one else had one.

I wasn't actually holding any of these warrants though, just looking at them as part of learning about warrants.

GP

 

[cuttlefish]

GP - I'm curious - if you are looking at warrants why not look into ETO's instead? They are likely to be more liquid, probably better regulated, consistent set of rules across all price/time series, better MM guidelines.

The reason I raise it is that I'm fairly new to options trading and the big thing that I wasn't aware of prior to options trading is the liquidity factor and how it affects trading and pricing (I also wasn't really across concepts like vega and gamma either for that matter but thats another story).

From the experience I've gained so far I'd recommend going for the ETO's over warrants because there's already enough variables to factor in with options without adding the complexities of different rules for different products combined with poor liquidity. (unless of course your goal is to get really clever and look for arbitrage opportunities around these factors).

Of course its a bit of a hassle organising to get set up for options trading, but once its done its done.

Just my

 

[phoenixrising]

A lot of volatility for LHG today, especially late, maybe caught them napping?

I exited a straight out long LHG CFD position today, dropped substantially.

 

[flyhigher]

This happens a lot for deep ITM options as well. The worst case happened to me last year was that bid price of a 2 month deep ITM wpl put option is even lower than intrinsic value. i had to take it since i did not have enough money to exercise the option. One of advantage of warrant market is that bid and ask spread is quite small. MM there do not disappear as oftern as mm in the ETO do.
Maybe we shall move to US market to trade derivatives.
cheers