-- I posted this on Lobster's board just now, thought I would put it up here too. Enjoy!
A few months back, I had the good fortune to discuss trading styles with a real live market maker from one of our favorite OTC MMs. Of course, I had many questions:
Serf: Your job must be cool.
MM: LOL, I'm a trader, just like you. I have my own accounts which I try to grow into larger accounts.
Serf: Do you make a lot of money?
MM: Not really. Most of us are just trying to pay our rent. The company makes money though.
Serf: But you get the spread!
MM: LOL, the company gets the spread. I get whatever I can make on the ups and downs.
Serf: Do you ever short penny stocks?
MM: Yes, and right now I'm down $5,000 on CSHD. That was a stupid call on my part. Rufus is the master of pump.
Serf: I am puzzled by supposedly 'dead' stocks that trade millions of shares every day at .0001. Why is that? As an MM, are you required to buy everything on the bid, such as insiders who are printing and dumping?
MM: I'm not required to buy a damn thing.
Serf: Then who is buying millions of shares of dead companies at .0001?
MM: I'll buy a million shares of anything at .0001.
Serf: But I see HUNDREDS of millions going buy, on stocks that haven't had news for months!
MM: I'll buy a hundred million shares of anything at .0001.
Serf: LOL. Really?
MM: Absolutely! One in ten of these companies will fire up again, and I'll be selling my worthless shares like candy at .01 and above.
Serf: Can I tell people this?
MM: Sure, but don't use my name or my company's name.
Good stocks are obvious. Extensive DD is how you convince yourself to buy a bad one.