Secrets of a Market Maker Presented by Andrew Keene

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Andrew Keene - Took my last $50,000 and turned it into millions - Market Maker @ CBOE 10+ Years Have Taught 1000’s of Students to Full Time Traders Regular Contributor to CNBC, CBOE, Bloomberg

Why Best Time Ever to Trade? This is the BEST time ever to trade Options: Markets are Tighter Penny Wide More Liquid Than Ever

Market Maker Make $$$ on Bid-Offer Spread ? A market maker is someone who is always quoting a bid-ask spread for a given option contract. The market maker is willing to take either side of the trade and is hoping to profit from the spread between the bid and offer. Example: AAPL is trading at $590.00 The market maker makes a market for the Dec 650 calls at 25.00-25.30 20 up. This means that at this given time the market maker is willing to buy 20 contracts at $25 and/or sell 20 contracts at $25.30.

Market Maker Makes $$$ on Implied Volatility Think about the market makers inventory like you would a jersey store. Its all about inventory in and inventory out. The store owner will keep the store well stocked with the “hot” names. Lebron James is a popular name and will always sell out. Since these names are more popular the store owner knows there is a bigger demand for them. He also knows he needs to be more competitive in his pricing. The market maker operates the same way. Stocks that are heavily traded will have a tighter market and more quantity available. AAPL and FB are the Lebron jerseys of options.

Market Maker Makes $$$ on Time Decay Time Decay: Think about options like an insurance policy that you buy. You may pay your car insurance premiums once a month but you are really paying them a little every day. Options are the same way. Returning to the previous example the market maker who sold the trader those APPL calls also profits from time decay. The option trader who bought those calls paid all of the premium up front but the options will decay a little everyday. As the market maker is delta neutral they are profiting on this time decay.

Is it That Easy to Become a Market Maker? When I got my start on the floor I went through a training program that could have taken me as long as a year to complete. During that time I sat in class everyday, took tests once a week, and participated in mock trading after the close. The point of this training was to learn every single way a market maker can make money. The secrets of a market maker so to speak. Of the 14 of us only 3 got the opportunity to trade on the floor. Since then markets have changed and being a market maker is not as profitable. I made the move to retail customer but still use the things I learned from being a market maker for over a decade.

Market Maker Secret The Market Maker makes money off you, but you don’t even realize it. How do they make money from you: The Bid-Offer Spread Implied Volatility Changes Time Decay They do NOT run stops though, but its time to FIGHT back against them and start taking their money.

I will Teach you the Ways to Take Money from the Market Makers like Me, IT’S SIMPLE & PROFITABLE!!!!

Using the Market Maker Targets How to Use the Market Makers Targets: How do you develop price targets? Many use technical indicators like fib levels or wave patterns but there is a much more accurate and efficient method for doing this. We can use the options market to calculate how much of a move the market maker is pricing into the options. We use this by calculating the measured move target using the at the money straddle

Use Straddles to My Advantage Long Straddle Trade: Long Call, Long Put, Same Strike Advantages: Unlimited profit potential Disadvantages: Expensive premium long Max Risk: Premium paid Max Reward: Unlimited Breakeven: Strike price (+/-) the total purchase price

Market Makers Target How to Use the Market Makers Targets: Once we know the straddle price we can calculate targets Upside target: Straddle price plus strike price Downside target: Strike price minus straddle price In general the short the time to expiration the more accurate these targets are. A trader can use this method in any option product for any catalyst event.

Lets Look at an Example in SWKS: How to Use the Market Makers Targets: Example: Skyworks (SWKS) is reporting earnings. The stock is trading around $37.00 The Apr Weekly 37 Straddle is trading at $4.00 Upside target: $41.00 Downside Target: $33.00 Using the these targets rather than technically projected targets is much more accurate. Knowing them also helps a trader identify key levels. This is a trick employed by market makers all the time

I Made 400% Profits in 2 Days: How to Use the Market Makers Targets: Example: Skyworks (SWKS) is reporting earnings. The stock is trading around $37.00 I bought the SWKS 39-41-43 Call Fly for $.38 debit Risk: $38 per 1 lot Reward: $162 per 1 lot I closed the position at $1.55 credit or $1.17 Profits, or 400% in 4 Days

How I decide What Trades to Take The Trading Plan in Detail: C:  Chart: Bullish, Bearish or Neutral? - Strength of trend into earnings. Gap Points? Support Resistance? Trend is Your Friend

Its not Rest and Relaxation The Trading Plan in Detail: R:  Risk:  How much of Total Book or Dollar Amount am I willing to lose. - Not swinging for the fences, Never more than 5% of Book R:  Reward: How much do I want to make on this Trade? - What’s a minimum acceptable Risk / Reward Ratio?

I love Tacos and Tequilla as well as Time & Targets The Trading Plan in Detail: T:  Time: When do I think this will happen? - Time is Money...Know when the Trade is over T:  Target: Where will I take profits, scratch trades or stop out… -Stick to the plan, Control Risk First, Manage Profits Second

We Need to Fight Back NOW Remember that in order for the market maker to keep making money they need customers. I will teach you the ways to start taking money back from the market maker. The market maker isn’t concerned with running your stops or squeezing you out of a position. We can beat them at their own tricks and I will teach you how.

SPECIAL TOPIC COURSE: How to Take Money from the Market Makers Use Call-Put Ratio to Determine Investor Sentiment Use the Market Makers Target for Iron Condors Learn Best Time of Day and Week to Trade Credit and Debit Spreads Learn when and why to Trade a Credit or Debit Spread Learn how to Potentially Profit 600% in Options Using Market Maker Targets TOMORROW: May 1st at 7:00 PM $97 www.keeneonthemarket.com/marketmaker 312-261-5581