Market Making Volatility Interview Intuition
Market making volatility interview intuition for why uncertainty can change option value, spread width, and quote confidence.
Candidates connecting uncertainty and option-style markets.
Volatility is uncertainty about movement
In interview intuition, volatility means the underlying outcome can move over a wider range. That matters for convex payoffs.
Convex payoffs can like movement
An option or straddle can benefit from large moves because downside may be limited while upside grows with movement.
Concrete example
A toy straddle that pays on absolute move is worth more when large moves become more likely, even if the expected direction is unchanged.
Volatility uncertainty widens spread
If you are unsure about volatility itself, you may need a wider quote to avoid being picked off by better estimates.
Separate direction from volatility
A higher volatility view is not the same as a bullish or bearish view. It is about dispersion, not just direction.
Common mistakes
Candidates often treat volatility as a vague risk word. In option-style markets, it changes expected payoff and quote width.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.