Market Maker
A market maker is a firm or individual that provides liquidity by continuously quoting buy and sell prices for an asset. They profit from the bid-ask spread while taking on inventory risk. Market makers ensure traders can always find a counterparty.
Understanding the Concept
• Profit from spread between bid and ask prices • Must quote prices continuously during trading hours • Take on risk of holding inventory when prices move • Essential for liquid, efficient markets
Real-World Example
A market maker in Apple stock quotes $150.00 bid and $150.02 ask. You buy 100 shares at $150.02 (they sell to you). Another trader sells 100 shares at $150.00 (they buy from them). They profit $0.02 per share without price risk if both trades happen quickly. Volume makes small spreads profitable.
How Strykr Helps
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