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Comment by seadan83

Market makers are not necessarily "the pros", they hold a reserved place in stock exchanges. The 'pros' are generally institutional investors (eg: hedge funds).

Market makers make money by offering spreads. EG: fair price of a stock is $1, market makers let you buy that stock at $1.01, and sell for $0.99. Hence, if you buy and sell, while the market maker is paying $1, they make $0.01 on both sides of the trade because they are marking up the price.

In options, the spread can be quite extreme, more than 30% of the price of the underlying (eg: you can buy for $0.60, or sell at $0.20, which means purchasing such an option and you are down by over two thirds out of the gate).

parent seadan83 4 years ago

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