Option Market Making

Aaron Brown once described The Laws of Trading as a minor classic: “distillations of centuries of experience filtered through the logical brain of expert practitioners”. I’d extend that to Option Market Making.

While most intellectual dilettantes focus on the theory of how to price options, Baird’s work is a practical guide about how to trade them. In the real world, the bid-ask is not cleanly determined by Black-Scholes or by the curvature of the volatility surface, but rather by some core principles of options risk and how individual participants manage them.

That intuition, honed across decades of open outcry trading on the exchange floor, is what makes this book from 1982 still relevant today.