Options Market Making Risk Interview Guide
Options market making risk interview guide for inventory, delta, gamma, vega, spreads, hedging, examples, and practical mistakes.
Candidates discussing inventory, Greeks, volatility, and hedging.
Options market makers manage many risks
An options market maker can hold delta, gamma, vega, theta, skew, inventory, and liquidity risk. The quote needs to compensate for more than simple direction.
Inventory affects quoting
A desk long too much of one exposure may shade quotes to reduce that exposure. The exact response depends on risk limits, hedge availability, and market conditions.
Concrete example
If a market maker is short gamma near expiry, fast underlying moves can force frequent hedging. Wider spreads or reduced size may be reasonable under that risk.
Hedging is imperfect
Delta hedges may leave gamma and vega exposure, while vega hedges may introduce other strike or expiry risk. Liquidity and transaction costs shape what is practical.
Common mistakes
Candidates often discuss only delta. In options market making, a strong answer names multiple Greek and inventory risks, then says which one dominates the prompt.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.