Institution Option Trading Part-1

Role of Market Makers & Liquidity Providers
Institutions often rely on market makers for tight bid-ask spreads.

Market makers hedge every trade using delta-neutral strategies.

Their presence helps institutions build or unwind large positions without disrupting prices.

Institutional Examples in Option Trading
Hedge Funds: Use volatility arbitrage, gamma scalping, dispersion trading.

Insurance Firms: Use long-dated puts to hedge annuity products.

Banks: Write structured products with option-like features (e.g., equity-linked notes).

Asset Managers: Use protective puts or collars on core portfolios.