Happy Philosophy Friday, traders.

Ben here.

A lot of people buy options without knowing who is selling them the contracts.

The answer lies behind the curtain of the options market, where big, shadowy money quietly keeps the market moving.

I’m talking about market makers — individuals (or entities) who professionally buy and sell options contracts.

WARNING: You might be buying options without the slightest clue about who is on the other side of the trade.

There’s a lot of confusion about who market makers are, what they do, and why you should pay close attention to their moves.

But, make no mistake — if you don’t understand these concepts, the market makers will eventually move your money from your account to theirs.

Let’s prevent that from happening. Today, I’ll tell you everything you need to know about market makers — and explain how they fit into my overall trading philosophy…

What Market Makers Do

Market makers are critical to the options market. We need them to trade. They’re sort of like helpful sales associates in a huge, complex department store. 

They provide liquidity and quote prices to buyers and sellers, ensuring that trades can happen smoothly.

Market makers also receive credit for selling contracts to you. 

If you buy ten $1.00 options contracts, a market maker somewhere just received a credit of $1000. 

And if the contract stays below the strike price for calls (or above the strike price for puts) by expiration, they get to keep that money. 

Market makers are typically big financial institutions or firms, trading in massive size and volume. 

But there are independent market makers as well — people with big accounts. 

They don’t care about individual trades. It’s all about volume. The more you trade, the more they make.

If options traders are the casino gamblers of the stock market, then market makers are the house — the casino itself. 

They give us a table to play our game on by taking the other side of our bets. 

I’m sure you’ve heard the saying: “The house always wins.”

But with the right circumstances, betting strategy, and a bit of luck, gamblers can win big. And the same goes for options traders…

Example: When GameStop Corp. (NYSE: GME) went parabolic in 2021 and r/WallStreetBets traders bankrupted multiple hedge funds.

In this analogy, trading isn’t roulette or blackjack — it’s poker. 

It’s primarily a game of skill where chance plays a role — not the other way around.

Why Market Makers Matter

As traders, we all need to follow our rules.

We need to follow the systems and the setups that we trade day in and day out.

We know our trading truths.

But of course, in the market, we’re always trading against somebody…

Somebody wins, somebody loses — this is especially true when it comes to options.

In the options market, we are trading against the market makers — hidden puppet masters who literally “make the market” by selling us options.

And at the end of the day, they wanna win — they wanna take our money.

So it benefits them to have us question our setups, question our strategy, question our truth — what we know to be true as traders.

When we begin to question what is true — the pillars that we stand on — then the ground below us gets destabilized.

If your core philosophical truth gets destabilized, fear sets in. 

And when you’re afraid, the part of your brain that makes rational, logical decisions stops working, taken over by the part of your brain that wants you to survive.

This is often referred to as “fight or flight.”

The market makers want to stew this fear within us and activate our “flight response” as traders.

They’ll be thinking, “Go run away, sell the contract, and take off.”

If we let our opponents achieve this, it can cause us to question truth, cause us to be afraid.

Then, they win and we lose and that’s to their benefit

This is why it’s so important for us as traders to know our setups, to have our rules, and to stick to those rules.

I always say plan your trade and trade your plan.

When money is on the line, the fear of loss is always in the back of our minds, and that fear can lead us to do things we would not otherwise do.

So, that’s my encouragement to you today.

Make sure you stand on the truth.

Execute your plan according to the bread-and-butter, battle-tested setups and strategies that you use every day.

And speaking of strategies I use every day, let’s take a look at…

💰The Biggest Smart-Money Bets of the Day💰

• $3.10 million bullish bet on JCI 06/21/2024 $65 calls @ $3.10 avg (seen on 3/21)

• $1.3 million bullish bet on JPM 04/19/2024 $210 calls @ $1.00 (seen on 3/21)

• $1.27 million bullish bet on GOOGL 04/12/2024 $149 calls @ $3.10 (seen on 3/21)

Happy trading,

Ben Sturgill

P.S. If you want access to more ‘smart money’ sweeps like these…

TODAY, March 22 at 12 p.m. EST — I’m hosting an urgent LIVE WEBINAR where I’ll reveal even more promising ‘smart money’ setups I’m seeing this week.
Don’t miss out — CLICK HERE NOW TO RESERVE YOUR SEAT.