Market Maker
A firm or individual that provides liquidity by continuously quoting bid and ask prices for options.
Explanation
Market makers profit from the bid-ask spread and manage risk by hedging their positions. They are essential for maintaining orderly markets and ensuring there is always a counterparty available. Market makers use sophisticated models and technology to price options and manage their Greeks exposure.
Example
When you place an order to buy a call, a market maker may be the seller on the other side, quoting a bid of $2.45 and an ask of $2.50.