One counterparty always trades right before the move
Asked at SIG
You quote a fairly illiquid options series. Reviewing the tape, you notice a pattern: one particular counterparty keeps trading against you, and shortly after each of their fills the underlying makes a sharp move in their favor. Other flow in the series looks harmless.
What is going on, and what do you do about this specific counterparty?
Show a hint
Their trades are not random. The information is concentrated in one source, not spread across the whole market.
Your answer
This one is open-ended. Work it through, then check your reasoning against the full solution.