Who creates the bid/ask when there is 0 open interest in an option??

Cabin111 · Nov 19, 2021

I just had an option expire today...Meritor (MTOR). My covered call at $35. did not get called away. I want to write another one in a few days possibly for the May 22 $35. There in no open interest for this option. Meritor has a market cap of about two billion dollars. Not sexy, but I would think there would be some interest. The stock rose over 3.5% today.

So again, who creates the bid/ask...Market makers/brokers??

OptionsOptionsOptions · Nov 19, 2021

I always thought that Market Makers have to provided a market for a minimum number of contracts.

schizo · Nov 19, 2021

Cabin111 said:
I want to write another one in a few days possibly for the May 22 $35. There in no open interest for this option. So again, who creates the bid/ask...Market makers/brokers??

Not an options techie, but once you "open" the contract, wouldn't it show up?

Cabin111 · Nov 19, 2021

schizo said:
Not an options techie, but once you "open" the contract, wouldn't it show up?

Don't know...But, there is a bid $1.15 and ask $1.40...Who created it??

And Yeah, I'm not lazy...From Investopedia

Open interest indicates the total number of option contracts that are currently out there. These are contracts that have been traded but not yet liquidated by an offsetting trade or an exercise or assignment. Unlike options trading volume, open interest is not updated during the trading day.

The more I look, I see that there WAS trading on this option at some time. Just wondering for lightly traded options (where no option has been traded yet), who creates the bid/ask??

horizon · Nov 19, 2021

I think market maker creates that. Some tickers I trade have crazy bid ask and I have to be the one to initiate that. And the system slowly counters it. You keep adjust if you want, until it filled.

2rosy · Nov 20, 2021

Market maker or yourself. Send an order to sell at some price and watch an offer appear

newwurldmn · Nov 20, 2021

Market makers looking to profit off the vol edge or off another relative value position.

rb7 · Nov 20, 2021

Cabin111 said:
I just had an option expire today...Meritor (MTOR). My covered call at $35. did not get called away. I want to write another one in a few days possibly for the May 22 $35. There in no open interest for this option. Meritor has a market cap of about two billion dollars. Not sexy, but I would think there would be some interest. The stock rose over 3.5% today.

So again, who creates the bid/ask...Market makers/brokers??

Market makers in 99% of the time.
The other 1% is regular orders coming from Public Customers, Pro Customers, brokers, etc.

Market makers, in return of some benefits, have quoting requirements that they need to respect.