Is it legal or ? for market makers to manipulate stocks and options?

This may sound like a strange question but I have noticed on all stocks and options I have purchased and monitored the following always accurs: The offers are raised and the bids are reduced. The lowering has the effect of taking out the volatility plus gives them time to manipulate further the stock price by raising the offer.

Now I could be wrong here but I purchased an option with the underlying at 27.21 for 1.50 (25 put) about 5 to 6 days later the stock had dropped to 26.20 but the bid was at 1.45 this was in JAN on an APR put.

Almost every option transaction I monitor I see offers increase sometimes up to 50 to 60 cents but the bid will often drop by .05. So is there any rule that allows a market maker to charge whatever he can get on the offer while reducing the bid or is the bid supposed to match the delta of the option with the underlying?

Answers

Creezy answered a question in General Market.
631 points

Creezy answered one year ago …

Hi William, a question was asked a couple of weeks ago that might pertain to what you're asking. Read all the responses because I think they paint a clear picture of why this happens:

http://www.tickerhound.com/questions/detail/2008011da266f7

Read more from Creezy