RE: The Zheng Calls 20242 Mar 2026 05:10
Leew, The level of derangement in your post and lack of knowledge, amazing, you need to understand that every MM that is selling a stock will have what is called an 'inventory' in that stock.
Market makers (MMs) do hold shares in inventory—it's a core part of how they operate—but not in the way a retail investor or long-term holder does. Your point that MMs primarily buy/sell to profit from the margin (bid-ask spread) and manage order flow is mostly correct, but the reality is more nuanced: they must hold inventory temporarily (and sometimes longer) to provide liquidity, and they actively manage it rather than just flipping everything instantly.Here's why MMs hold shares (inventory) and how it actually works, based on how markets function:To provide immediate liquidity: MMs quote both bid (buy) and ask (sell) prices continuously. When a seller hits their bid, the MM buys shares into their own inventory. When a buyer hits their ask, the MM sells from inventory. Without holding some inventory, they couldn't fill orders instantly—markets would have huge gaps or delays. They hold shares precisely so they can "be there" for trades when natural buyers/sellers aren't perfectly matched in real time.
Inventory is unavoidable from order flow imbalances: If more people sell than buy (or vice versa), the MM ends up with a net long or short position. They don't choose to "invest" like you or I might; it's a byproduct of facilitating trades. They hold until they can unwind it profitably or neutrally.
They manage and sometimes profit from that inventory: Primary profit is the bid-ask spread (buy low from sellers, sell high to buyers).
But they can also earn from inventory value changes: if they buy shares into inventory and the price rises before they sell, that's extra profit (beyond the spread). Sources like Nasdaq and Investopedia note that MMs "may choose to hold certain positions, hoping the price of the security will rise before they sell," though this adds risk.
They adjust quotes to control inventory: Too much long? Widen the spread or lower prices to encourage selling (offload). Too short? Raise prices to attract sellers.
Risk management is key—they don't hold forever or directionally like investors: They hedge exposures (using derivatives, related securities, or offsetting trades) to neutralize directional risk.
They aim to stay roughly neutral over time, turning over inventory quickly (often intraday or short-term) rather than holding long-term bets.
Large or adverse inventory forces wider spreads or reduced quoting to limit risk—studies show spreads widen when MMs have big positions or losses.
In short: MMs aren't "buying to hold" like a chaebol or retail punter hoping for moonshots. They hold inventory as a necessary tool to make markets, earn the spread, and handle imbalances—but they actively manage, hedge, and unwind it to minimise directional exposure.
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