Yes, I agree. But if all MMs withdrew but you had lots of other stickier liquidity, spreads might widen but it would cause a crash. Of course if Tether implodes, all the long term buyers will evaporate, which is my point: medium/long term price is dictate by swing and positional traders, not market makers.
> Either that, or their bid will be 0, like on 0DTE options that are far out of the money.
What? This doesn’t make any sense. 0dte options are often some of the most actively traded. But I’m not really sure you get this stuff.
> What? This doesn’t make any sense. 0dte options are often some of the most actively traded. But I’m not really sure you get this stuff.
Did you miss the “far out of the money” part of my comment?
What’s the bid/ask on the Oct 8 SPX 4550C going to be at open tomorrow, assuming SPX opens around 4400? Bid 0.00, Ask 0.05
I also understand there is resting (and possibly hidden, depending on the order types allowed by the exchange) liquidity on the order book that would be there if USDT collapsed and MMs pulled out, but how long do you think it would take for orders to evaporate for an asset that is rapidly approaching a 0 dollar valuation?
I’m just a dumb amateur, but I have a basic grasp of the mechanics.
You do understand my original comment chain was talking about a complete tether collapse where it has 0 value and not just a temporary dip in price.. right? Go read arcticbull’s comment about 6 levels up, that’s the scenario I was referring to in my comment.
I’ve traded both ES and SPX options so you can stop quizzing me about them. By the way, minimum price tick on ES options is .25 (which is $12.50) lmao. If you don’t believe me, look at the option chain, mr career hedge fund options trader guy (your words, not mine).
Separately from all this, there are SPX options, they're cash-settled European index options (for those on the sidelines American options can be exercised any time up to expiry, European only on the day of expiry) with a $100/tick notional contract value. They're super useful if you want to trade indices (as compared to say SPY options) because you don't have to deal with dividend-triggered exercise risk and they offer 60% long term capital gains tax treatment no matter how long you hold them for (like futures and futures options). [1]
[edit] They do trade under various tickers depending on the exchange though, so maybe that's some of the confusion? Btw, not trying to explain it to you in particular, just to passers-by.
Yes, you've got the CBOE crap, you've got a gazillion other smaller venues, and you've got desks at every bank which will write you options on whatever you like.
OP is talking about trading ES and SPX, and it was more likely they had confused it with SPY given the other confusion around tick sizes and given the size of the big daddy SP contract (and the language suggested this person had just gone to the CME site and did a bit of copy paste...especially the language about on tick being $12.50, which any spoos trader will know by heart).
Anyway - going to leave this one, I think I've added all the value I can add.
> Either that, or their bid will be 0, like on 0DTE options that are far out of the money.
What? This doesn’t make any sense. 0dte options are often some of the most actively traded. But I’m not really sure you get this stuff.
Source: career hedge fund options trader