The S&P 500 hit 7,500 on Friday. Market makers bought. Then it went above 7,500. Market makers sold. This is called trading. Someone wrote an article about it.
Options traders in Chicago have apparently never seen a round number before. They treat 7,500 like it's the Berlin Wall of equity indexes. Buy below it. Sell above it. Repeat until someone writes a breathless summary suggesting this means something.
The headline promises an obscure index that could determine the market's next move. That's the tease. That's the hook. That's what gets Greg from Scottsdale to click through while he's supposed to be working. Greg will read three paragraphs. Greg will nod. Greg will check his Robinhood account. Greg will do nothing with this information because Greg doesn't trade options and wouldn't know a market maker if one repossessed his Camry.
Here's what actually happened: a price level existed, people traded around it, and financial media needed to publish something before lunch. The obscure index they're talking about? Doesn't matter. Could be the VIX. Could be the put-call ratio. Could be the number of times Jim Cramer said the word magnificent this week. The point is to make you feel like you're missing something.
You're not missing anything.
Market makers buy dips and sell rips because that's their job. They're not prophets. They're not reading tea leaves. They're providing liquidity and managing risk in real time. When the S&P approaches a big round number with heavy options positioning, they adjust. This is not a secret. This is not a strategy. This is just how delta hedging works when you're short gamma at a strike price every retail trader can remember.
The real obscure index determining the market's next move is the one that measures how many people will read this article and still not understand what a market maker does.
Photo by Olha Ivanova on Unsplash
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