As Good As It Gets TRADING THE MMM (MARKET MAKER MOVE) |
So, what is the MMM (Market Maker Move) and how do you use it?The MMM calculates the expected magnitude of price movement based on market volatility. According to TOS (ThinkOrSwim) the calculation is made using stock price, volatility differential, and time to expiration.
In short, it means that the options market MMM has priced in an expected move from current price up or down from that of a typical trading day. For me, it represents another indicator to take into account what the expected movement for a stock (ETF) that I’m trading.
MMM therefore is one of the ways to see what market “expectations” are for a particular stock (ETF). Remember: Expectations and Realities can frequently be unrelated parameters?
Where do you find the MMM on TOS? It shows on the option chain, usually as a yellow MMM showing a +- from the current price, and is located to the right of the stock you have entered (on that same line out to the right). If it is not automatically showing, it is one of the “All Products” offered by TOS. Not all stocks will show MMM, but most of the major stocks will. (If not showing on your charts, you can google how to add MMM to your chart or call a TOS agent for help).
So how do I use the MMM?
On a daily basis, I will frequently use it for trading the SPX and/or XSP (the mini SPX). I usually place trades for these around 10:00 a.m. after the market has established its ORB (Opening Range Breakout). For these trades, I will Sell Credit Spreads outside the MMM expected move. These trades can be either Call or Put Credit Spreads.
Remember: When you sell a Credit Spread you receive funds into your account with maximum risk being the spread minus the funds received. My goal is for these to then trade within MMM parameters and let me keep my cash received. The nice thing about the SPX and XSP is that they cash settle at the end of the day (it is not necessary to close them prior to market close at 4:00 P.M) which is good for smaller accounts since these trades do not count as a day trade unless you close it prior to the end of market, which it would then count as a day trade. For larger accounts, you can place these trades multiple times during the day and place a GTC (Good Until Cancelled) to buy them back at half price (which is something I frequently do on 0 DTE trades).
This process can also be used for stocks (I use it for stocks that have a lot of volatility and premium available). I mostly trade these on the day of expiration, or the night before. The night before provides for overnight theta decay.
An example for this might be TSLA. Before market open (last Friday, May 5, 2025) the MMM was +-6.44 and the stock price was 280.52. The MMM range then was 286.96 high and 274.08 low. TSLA closed at 287.21 just above the MMM (this is an example and I did not place that particular trade, although I would have had a GTC auto close for around half price buyback during the day if a Credit Call, or Put spread). My choice is to always take a half price gain rather than experience a double loss. A good trade based on MMM would have been a 287.50/290 CCS (Call Credit Spread) or a 272.50/270 Put Spread, with both just outside the MMM.
For day trades placed in the morning, one will usually enjoy accelerated theta decay in the afternoon for Credit Spread trades. Wins can go to losses, especially in the last half hour of trading, and so I close any that might be in range and usually don’t place Credit Spreads during that time period (although I have a friend who frequently trades during the last half hour and has had mixed results). Market chops for Credit Spreads generally work in your favor.
When trying to figure where a stock might close, I also take into consideration where the most OI (Call & Put) is. It has been my observation through the years that closing price is frequently right at the level of most OI where the brokers and/or market makers can dash the hopes of traders or make the positions less valuable? (This is often referred to “as getting the rug pulled out from under you”)
These are some of my thoughts, and I’m always interested in yours!
A look at the TSLA MMM:
TSLA Option Chain:
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