Blog Posts

We look at how market makers choose their markets and strategies.   Key Takeaways – How Market Makers Choose Their Markets & Strategies Liquidity and Volume Market makers select markets with high liquidity and volume to ensure enough trading activity for tight bid-ask spreads and minimal holding times for securities. Risk Management They use sophisticated […]

Market makers have an important role in financial markets by providing liquidity and facilitating trading by buying and selling securities from their own inventory. They stand ready to buy or sell at publicly quoted prices, which helps with smoother market operations. The largest market makers typically operate in various segments, including equities, fixed income, foreign […]

Based on historical data for the S&P 500 index going back to 1928: In up years (when the index has a positive annual return): The average annual percentage gain is around +20%. Up years occur around 72% of the time. In down years (when the index has a negative annual return): The average annual percentage […]

Margin rates refer to the interest rate charged by brokers when traders or investors borrow money to buy securities (such as stocks or bonds) on margin. Essentially, buying on margin allows investors to leverage their purchasing power by using borrowed funds to increase their potential investment return. The margin rate is important because it determines […]

The term “penny stocks” refers to stocks trading at a low price per share, typically under $5, and often outside of major market exchanges (sometimes the pink sheets). These stocks are considered highly speculative due to their low price, small market capitalization, and limited following and disclosure. However, several penny stocks have defied the odds […]

A blow-off top refers to a chart pattern that indicates a rapid and significant increase in a security or asset’s price and trading volume, typically followed by a similarly sharp decline. This pattern is typically associated with the climax of a bullish trend, where prices surge to unsustainable levels before succumbing to a sharp reversal. […]

Book skew is a concept derived from the market microstructure that quantitatively measures the imbalance between the buy and sell sides of the order book in financial markets. Specifically, it refers to the discrepancy between the resting bid depth (vb​) and the resting ask depth (va​) at the top of the order book. This discrepancy […]

The trading of options contracts during the premarket session is usually not possible. Some index options can be traded outside standard market hours. Futures options can be traded outside the market hours for securities (assuming the futures exchange is open). For example, options tied to major indexes (like SPX – e.g., ES futures) have extended […]

Low float stocks are shares of a company that are available for trading in the open market and are characterized by a relatively small number of shares outstanding that aren’t held by insiders, governments, or restricted investors who can’t trade them freely. The “float” refers to the number of shares actually available for trading by […]

Short interest, often expressed as a percentage known as the “short float,” refers to the proportion of a company’s outstanding shares that are sold short but have not yet been covered or closed out. As a financial indicator, it offers insights into market sentiment and potential price movements.   Relevance of Short Float Market Sentiment […]