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Why Market Makers Don’t Want You Trading Order Flow — Our Big Advantage

by | Mar 21, 2022 | Options

The stock market was digesting last week’s move just fine and then Federal Reserve Chair Jerome Powell had to open his yap…

And despite not saying anything he didn’t say last week, the S&P 500 dropped 40 points and all three major indices turned red… Thanks a lot.

But despite good ol’ J-Pow and some illiquid options markets sandbagging us, it’s been a productive weekend for the New Money Crew strategies.

Weekly Blitz Alerts closed on the second leg of a trade on Pure Storage (NYSE: PSTG) for a 50% return!*

Oil is back on an upswing after dipping below $100 a barrel last week. The move helped Alpha Sweep Alerts score a 31% gain* on our good friend Occidental Petroleum (NYSE: OXY).

With semiconductors pulling back and earnings events from Adobe Inc. (Nasdaq: ADBE) and Nio Inc. (NYSE: NIO), I can’t help but keep my eyes glued on tech this week.

It’s a great way to start the week, but the big story in Monday’s markets is these low volume, illiquid options that almost happened for Wiretap Alerts

Illiquid Options Markets and the One That Got Away

On Friday, 4,000 contracts of Anaplan, Inc. (NYSE: PLAN) monthly May $50 calls hit my scanner…

Though, sadly the calls jumped from $3.60 to $4.70 before I could get the trade typed and sent out.

Moves like this are just another reason why this is one of the toughest markets to trade I’ve ever seen.

One of the side effects of the spike in volatility we’ve seen in the past several weeks is there are fewer institutional and retail options traders in anything outside of the most widely traded stocks.

In the past, we’ve talked about why volume and liquidity are critical to entering and exiting trades.

You might remember that when an option is illiquid — or thinly traded —the market spread between the bid and the ask gets wider.

The wider the spread between them makes it more difficult to reliably execute the trade, here’s why…

If a big trade like this one hits on an illiquid option chain, volatility goes up and market makers spike the price to keep more traders from piling on…

It was a good move on for them, too, since PLAN announced it would be bought out at $66 per share — about 30% above Friday’s closing price.

a stock chart for PLAN (illiquid options markets)

And those May $50 calls went to the moon, gaining as much as 239% from Friday’s close!

Sure, this was one that got away, but that won’t keep us from heading back into the waters and looking for another big catch each day.

*Stated results are typical for given period. Past performance is not indicative of any future results. Trade at your own risk.

P.S. With the stock market as choppy as it’s been…

It’s time to get excited about flatlining stocks.

Thanks to a little-known market “error,” I’ve been able to set up weekly opportunities on stocks that hardly even move!

Even if the stock barely goes up… or stays the exact same… and even if it falls

My Point30 Formula can take advantage!

Find out All About This Breakthrough Discovery

WRITTEN BY<br>Lance Ippolito

WRITTEN BY
Lance Ippolito

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