The Price Effect of Market Maker's Warehouse Stocks
2017-11-25

 

The following factors influence the market maker’s interest in the formation of a long-term trend of asset price change:

  1. The availability of this basic asset in the warehouses of market makers and the demand evolution on the over-the-counter market;
  2. Delta supplies of the last expired contracts of this asset.

If the demand on the over-the-counter market is low and/or each contract of delta supplies is positive, i.e. a market maker has to buy more physical assets than sell, then the preferred tendency is to lower the price, so that the price was lower for the purchase to one’s own warehouses.

If the demand on the over-the-counter market is high and/or each contract of delta supplies is negative, i.e. a market maker has to sell more physical assets than buy, then, in the absence of an explicit market sentiment, the tendency to price increase, so selling one’s warehouse at a higher price is favorable to market maker.

Identifying interest and guessing the moment of market maker participation in the long-term price formation is tantamount to reading the thoughts of people you do not know. Leave this to Lucky-traders and use cause-and-effect LRA instead.

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