With the way the market moved last few weeks (especially AAPL and TSLA), you could be forgiven to think the Robinhood effect was real. Especially when people like Matt Levine and even WSJ starts talking about it. People working from home, nowhere to spend money, seeing market news everyday and then jumping on to the most popular app to trade - all very believable for an unsophisticated "investor" like me.

I remember seeing a post on r/options this week about exactly this - large volume OTM calls causing MMs to buy stock and inflate price. This news has been very interesting in light of that.

> large volume OTM calls causing MMs to buy stock and inflate price

I’m a former options market maker. Seeing large volumes of retail flow is very different from seeing a giant institutional order. It affects what goes into the market versus gets internally crossed and what gets hedged and to what degree and how.

Individual investors have a moderately bad track record day trading. They have an abysmal one with options. I’m a decade out of the business, but we almost always defaulted to taking retail flow at risk.

Thanks for your insight!

So basically, the individual investor is screwed because they can’t figure out institutional orders, but market makers can that allows them to hedge?

I believe JC was saying that individual investors make bad choices, on the whole. Institutional less so.

Consequently, as a market maker who wants to limit their risk if a trade goes sideways, optimal hedging for each looks different.

(Part of this is probably related to the distribution of orders. I've heard large enough individual flow tends to mostly self-average.)

> all very believable for an unsophisticated "investor" like me.

Yeah, the problem here is that irrational picks by these people working from home are just opportunities for arbitrage by the institutional investors, who stabilize the price.