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Micron Technology, Inc. Message Board

  • chengweicui chengweicui Mar 13, 2013 9:55 AM Flag

    so confident !!!

    why MMs are so confident in a down market?

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    • how can they cash in if there are no good news to follow?

      • 1 Reply to chengweicui
      • Cheng: If you go strictly by the definition of a MM (Market Maker) they really care less about the company the equity of which they're making a market. A market maker is a bank or brokerage company that stands ready every second of the trading day with a firm ask and bid price for any number of equities. This is good for you, because when you place an order to...oh...for instance sell your MU shares (as an example), the market maker will actually purchase the stock from you, even if he doesn't have a seller lined up at that moment. In doing so, they are literally "making a market" for the stock.

        Why would an entity do this? It's lucrative. Market Makers are compensated for the risk they take by ;being able to manage the bid/ask spread (amongst other aspects). They're making their money on the spread. The difference between the ask and bid price may be small, pennies (or less), but by trading millions of shares a day, they managed to pocket a significant chunk of change to offset the risk. Think of it this way...they're the dealer at the Casino (if not the casino), managing the risk of the various players within its Universe. Last time I checked casino's weren't exactly going out of business. As a business I wish I had the business. ;-)

        Just some thoughts.

        American Net'Zen

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