Pls help me understand option market making

Quote from artfartdart:

electronic option market making is basically this:

(1) stream quotes (meaning, join the bid/ask up and down the entire options chain).
(2) if hit on something, auto hedge.
(3) maybe update your vol.
(4) print a "run" to see where your risk is.
(5) maybe aggressively bid at the monies to take off some vega.
(6) on and on it goes.
More...

Thanks

Could you please explain this , i know what LMM means , but in this pdf the Matching Algorithm for crude oil options is F ( fifo ) and implied is N ( N -NYMEX FIFO w/LMM ) , i dont get it is it F or N ?

http://www.cmegroup.com/globex/files/PriceBanding.pdf
 
Quote from Surprise:

Thanks

Could you please explain this , i know what LMM means , but in this pdf the Matching Algorithm for crude oil options is F ( fifo ) and implied is N ( N -NYMEX FIFO w/LMM ) , i dont get it is it F or N ?

http://www.cmegroup.com/globex/files/PriceBanding.pdf
More...

http://www.cmegroup.com/education/interactive/webinars-archived/implied-price-functionality.html

Ok so direct options orders will be matched by F , and implied options orders will be matched by N ? i think i got it , will appreciate if someone can give examples for implied orders on crude options ...

BTW re eurodollar options the matching algo is Y which if i understand correctly it means it will take forever for retail orders to get filled ( at the bid or offer ) .

The Eurodollar Option algorithm (Y) is an enhanced pro-rata algorithm that incorporates an LMM allocation before TOP order and pro-rata allocations. Once each LMM has been allocated their configurable percent, and if priority was established that meets the minimum requirement of 50 lots, the remaining quantity of the aggressor order is allocated to the TOP order until that order's quantity is exhausted.
If no TOP order exists or there is remaining quantity from the aggressor order after the Top order has been fulfilled, the remaining quantity will be allocated pro-rata.
The Eurodollar Option algorithm follows these stages to match trades:
LMM set to configurable percent
Assigns a TOP order percent allocation (25% with Min=50) that betters the market
Pro-rata with minimum allocation of one lot
FIFO for any residual quantity
 
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