Assume you are the market maker, you can make the market up or down at your own will like GOD !
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If you know 100% sure, tomorrow market will be positive 4%, how can you make money?
You will buy 50% of your cash with spy calls expiry tomorrow, right? -
Assume you have the knowledge of market buyers limit or market orders ahead of time. You know how to benefit ! When all people are selling (panic mode), you can buy puts ahead, when all people buying mode, you can buy calls ahead.
Just scan “Flash Boys or Dark Pools” book available in internet free google it. With advent of HFTs, and they act middle men between buying and selling, computer algorithm plays a major role.
- Market can not go up and up, it has to go up and down so that big banks, big funds make money. Whatever FED or Trump acts, they ignore and bring down so that they survive.
Think this situation, when AAPL is up around $325 and you know market is going to go down (as a market maker like GOD), you would have bought X numbers (holding/100) puts expiry 06/24/2020. This will keep your networth at peak level.
This is what Ray Dalio did six months before. When he had 150B+ stocks, he took 1.5B for purchasing puts. Now, his fund net worth remains same or positive.
They use software to analyze data and have good analysts to predict the danger ahead of time in Nov 2019 itself.