How does a Market Maker make a profit if the markets go down?

market makers image

Bman

It's my understanding that Market Makers make their profits by buying and selling stocks just like the general public, but just on a much larger scale and much smaller margins. So how do they make a profit if the price of the stocks they purchase decrease?

Answer
This is one down side to being a market maker however, part of being a market maker is always being prepared to take risk.

Market makers must always be available to make a market in their stocks regardless of what the market is doing.
In a deep down market, the market maker will sell short a large quantity of stocks either in their market place or in another, so when sellers come in to them they must buy, either talking on long positions or covering short positions they created earlier in the day.

When attribute the marker maker must have is to be nimble and prepared to react to whatever the market is giving them.

In some markets, market makers (as well as specialist) will work together in supporting the market together along with other well financed traders, in whatever is going on.

Whenever there is light volume or one sided volumes, market makers try to keep their inventory to a minimum