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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.

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