Market-making in options trading is the process of providing continuous bid and ask quotes for specific options contracts, facilitating trading and contributing to the market's liquidity and price discovery. Market makers act as intermediaries, buying options from sellers and selling them to buyers, always quoting a price at which they're willing to buy (bid) and sell (ask). This bid-ask spread, which is the difference between the bid and ask price, is the market maker's profit margin.
The presence of market makers in the options market contributes to liquidity in several ways:
Continuous Quotes: By constantly quoting bid and ask prices, market makers ensure that options contracts are always available for trading, even durin....
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