Liquidity & For-Profit Exchanges

Aug 27, 2015

By: Mike Butler

In this episode of Truth or Skepticism, Tom Sosnoff and Dylan Ratigan once again partake in a spirited debate on a spectrum of issues, and provide context around the crazy moves in the markets. Read the highlights below and watch the segment (and other archived segments) here!

 Recent Market Move

Less awareness is not better.
— Tom Sosnoff

The guys talk about the recent 10% down move in the S&P’s and put it in context compared to other recent market crashes. Tom explains that there is now a heightened sense of awareness & fear, which is why volatility has spiked. Dylan tries to quantify an average move, but proclaims that nothing about this situation seems average.

Going from always going up to a market that has very high levels of velocity does not strike me as average.
— Dylan Ratigan

Emotional Experience of Fear & Risk

It’s experiencing turbulence at 60k feet instead of 5k feet - it could fall a lot more.
— Dylan Ratigan

Tom & Dylan reflect on the emotions of fear and risk, and relate it back to implied volatility overstating historical volatility. They talk about how this could be just the beginning, since this happened coming off all-time highs.

This is very different because we were 2% off all time highs when it started, not near the “bottom.
— Tom Sosnoff

Premium Selling In This Environment

Dylan asks Tom what his parameters are to selling premium. Tom talks about the history of volatility as an asset class, and how it’s no longer just used to sell - you can play both sides now.

You’ve scared the children that were selling volatility as an asset class.
— Tom Sosnoff

Order Genesis Filter

The two discuss whether they’re looking at playing price extremes or selling high IV premium in an environment like this. Tom says he’s doing both. He’s looking to have negative deltas while selling premium in /ES & /NQ.

Price extreme game is a coin toss on being right or wrong, but there’s a higher payout if I’m right.
— Tom Sosnoff

For Profit Exchanges

The duo finishes off the segment discussing for profit exchanges and how they differ from the old days. Back in the day, the traders had a piece of the profit. These days they don’t, which is why there are only a few exchanges that are routing all the orders, and that is hurting liquidity.

We have to incentivize the players to come back.
— Tom Sosnoff

Remember, this is just a sneak peek! Check out the full video below:

Wanna see more Truth or Skepticism? Watch all the episodes here in the show archives!

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com.

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”). tastytrade is a trademark/servicemark owned by tastytrade.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information on this site should be considered general information and not in any case as a recommendation or advice concerning investment decisions. The reader itself is responsible for the risks associated with an investment decision based on the information stated in this material in light of his or her specific circumstances. The information on this website is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading in derivatives and other financial instruments involves risk, please read the Risk Disclosure Statement for Futures and Options. tastytrade is an investor in Small Exchange, Inc.

© copyright 2013 – 2021 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on tastytrade.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.