An Introduction to Option Market Making

Everything you need to know to get into option market making

The crypto options market has been growing in popularity for years now, yet it’s still an unexplored territory for the vast majority of crypto traders.

Now is an especially good time, after Coinbase acquired Deribit, the largest crypto options exchange.

This article serves as an introduction to all the topics you need to know to get into options market making, and we will present a simple options market maker at the end of this article.

This article has been created in collaboration with @NomaidQuant on X. Check him out!

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Table of Contents

1. What is an Option

2. Simple Option Pricing - Black-Scholes Model

3. Volatility Surface Fitting

4. Options Trading Risks - Comprehensive Overview

5. The Greeks - Measuring Risk Sensitivities

6. Delta and Gamma Hedging - Managing Directional Risk

7. Linear Quoting Model

8. Options Market Making vs L1 Product (Spot) Market Making

9. Final Remarks