Market maker

A firm that continuously quotes bid and ask prices, providing the liquidity that lets you trade options at any time.

A market maker is a firm (or trading desk) that continuously quotes both a bid and an ask on an option, standing ready to buy from you or sell to you at any moment. Without them, most option strikes would have no one on the other side of your order, so they are the reason you can click buy or sell and get filled almost instantly. They earn the spread between those two prices and hedge the risk they take on, usually in the underlying stock.

In practice this matters most when you look at liquidity. A tight bid-ask spread, say 1.20 by 1.22, tells you a market maker is actively competing and you can enter and exit cheaply. A wide spread like 1.10 by 1.60 warns you the strike is thinly traded and every round trip will cost you.

A common mistake is placing market orders on illiquid options. You are effectively letting the market maker pick the price, and you may pay far above the true mid. Use limit orders near the mid and let the quote come to you instead.

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All options terms

Call Put Strike price Premium Expiration In the money (ITM)At the money (ATM)Out of the money (OTM)Intrinsic value Time value (extrinsic)Delta Gamma Theta Vega Implied volatility (IV)Open interest Assignment Exercise Spread Break-even Probability of profit (POP)Assignment risk / early assignment LEAPS Naked (uncovered) option Rho Historical volatility (HV)Volume Bid-ask spread Moneyness Covered call Cash-secured put Vertical spread Iron condor Straddle Strangle Rolling Margin Max pain American-style option European-style option Contract multiplier Debit vs credit Volatility skew The Greeks Underlying Hedge Leverage Expected move Notional value Protective put Collar Butterfly spread Iron butterfly Calendar spread Diagonal spread Credit spread Debit spread Bull call spread Bear put spread Ratio spread Synthetic position The wheel strategy Poor man’s covered call (PMCC)Box spread Put-call parity Pin risk IV crush IV rank / IV percentile Ex-dividend date Deep in the money Weeklys 0DTE (zero days to expiration)Order types (to open / to close)Buying power reduction Cash settlement Slippage Mid price Black-Scholes model

Educational use only. Quotes are delayed ~15 minutes and nothing here is financial advice. Options trading involves substantial risk of loss.