Options Trading

Market Makers Recap

Test your knowledge of market maker behavior and its effects on trading. Select the best answer for each question.

What typically happens when market makers are heavily short calls?

They buy stock aggressively on dips They sell stock aggressively on rallies They remain delta neutral They buy more calls

Large put buying in NVDA is occurring. How do market makers likely respond?

Buy stock to remain delta neutral Sell stock to remain delta neutral No action needed Buy more puts

What creates "pin risk" for market makers near expiration?

Low open interest High trading volume Large open interest near current price Wide bid-ask spreads

AAPL has heavy call open interest at $175. Price is $174.80. What might happen?

Price likely to be pinned at $175 Price likely to move far from $175 No effect on price Market makers will buy puts

Which scenario creates the most gamma exposure for market makers?

Far OTM options near expiration ATM options near expiration Far OTM LEAPS Deep ITM LEAPS

Heavy put selling occurs in META. How might this affect stock price?

Creates upward pressure Creates downward pressure No effect on price Increases volatility

What typically causes the most aggressive hedging by market makers?

Far OTM option activity ATM option activity near expiration Deep ITM option activity Calendar spread trading

SPY has large call wall at $400. Price is $398. Best trading strategy?

Buy puts expecting rejection Buy calls expecting magnet effect Sell straddle expecting pin Buy straddle expecting breakout