Keeping it Simple with Simplify Asset Management

Keeping it Simple on the Road | Ep.8: Market-Making is Making Markets

Aug 3, 2023
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INSIGHT

Market Making Dynamics

  • Market makers provide liquidity by acting as a conduit for buyers and sellers, similar to an auto part store.
  • They set prices slightly below fair value, creating a spread to profit from transactions.
INSIGHT

Option Pricing

  • Option pricing isn't solely based on Black-Scholes but also on local market dynamics.
  • Market makers price competitively to ensure transactions and profits.
INSIGHT

Factors Impacting Local Market

  • Market makers' pricing is influenced by their capital and position pressures.
  • Large, disadvantageous positions can lead to swift price changes and liquidity vacuums, like in biotech binary events.
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