Market Maker and Options Trader

Market makers stand ready to buy and sell, quoting both a bid and an ask, and earn money from the spread while managing the risk of the positions they accumulate. Options market makers do this across thousands of option contracts, pricing them with models and hedging their exposure to price moves, volatility and time. These roles are found at electronic trading firms, proprietary trading firms and banks, and they are known for intense training, fast decision making and a heavy focus on probability.

What a market maker does#

Options market making#

Options traders manage a book of many options with different strikes and expiries. They think in Greeks:

They typically hedge delta continuously and manage gamma and vega across the book, aiming to profit from the spread and from pricing volatility well. See Delta Hedging and The Option Greeks Explained.

Skills firms look for#

• Probability and expected value thinking. See Expected Value.
• Fast mental arithmetic.
• Decision making under uncertainty with incomplete information.
• Risk discipline: knowing when to reduce exposure.
• Teamwork and communication on a busy desk.
• Programming, increasingly important as quoting is automated.

Interviews#

Market making interviews are known for:

Training and career path#

Many firms run training programs lasting several months, teaching options theory, the firm's systems and simulated trading before traders handle live risk. Traders often progress from assisting on a desk to managing their own products and eventually larger books, or move into research, strategy or management roles. See Trading Careers Explained.

Challenges#

• Adverse selection: losing to better informed traders.
• Intense competition with tight spreads.
• Sudden volatility that can cause large losses on unhedged risk. See Volatility Crush and Expansion.
• Technology dependence: systems must be fast and reliable. See Risk Controls and Kill Switches.

Frequently asked questions#

What does a market maker do?#

Quotes prices to buy and sell continuously, earning the bid ask spread while managing and hedging the positions taken on.

What skills do options traders need?#

Strong probability and mental maths, understanding of option pricing and the Greeks, risk discipline and quick decision making.

How do market makers make money?#

Mainly by capturing the spread across many trades and managing risk well, rather than betting on market direction.

Next, learn about macro asset class trading roles in FX, Rates, Credit and Commodity Traders.