Tuesday, September 29, 2009

Regulatory Changes Lead to Trading Opportunities

By: Larry Fisher, Trading RM LLC, Founding Partner

SEC Approved NYSE Euronext’s Option Pricing Proposal on September 16, 2009.


For the past 2 years, the leading equity options exchanges have been trying to convince the SEC that a move towards trading equity options in penny increments vs. the nickel and dime increments of the past is a poor idea. The SEC must disagree as they recently approved the trading proposal of NYSE Euronext. NYSE Euronext’s plan calls for all equity, equity ETF’s and equity index options priced under $3 to be traded in penny increments. In August 2000, the SEC oversaw the equity markets shift from trading in fractions to decimals. Regulatory changes usually cause a shift in the balance of power in the corresponding market. How will these changes affect the options market? Market makers will most likely be the most adversely affected as the decrease in the quoted spread will cut into their margins. Large institutions will complain that there will be less quoted size on the inside market. Individual investors should benefit from tighter markets. We believe that the groups that will benefit most from these changes are short term equity traders. That’s correct. Equity day traders who are savvy enough to understand how to express their views via options will see their profitability skyrocket. That is our focus at Trading RM LLC. For the past 2 years we have been preparing for these rule changes. We have developed a systematic approach to benefit from the new and ever changing landscape in the market place. We are confident that we can help successful short term (position holding time is minutes to days) equity traders express their views with less risk, more reward, and ultimately higher profits.
It is time for traders to evolve with the market and reap the rewards.

For more information, visit our website at www.tradingrm.com or contact us at info@tradingrm.com.

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