A contract product is very inactive when it first comes up, and sometimes it may not be traded for a whole day. Generally, the mainstream international practice is to introduce a market maker mechanism, in which market makers provide bilateral quotations in the market. The main task of market makers is to provide liquidity for the market.

the main profit source of market makers is the bid-ask spread. Take a specific contract as an example, I need to provide a bid and ask quotation for this contract, that is, a bilateral bid and ask quotation. If all transactions happen at a certain moment, then you just earn a ask-bid price difference, and this spread is your profit. In an ideal situation, you don't usually hold a directional market, don't bet on delta or volatility. Just like opening a casino, you just sit and count these spreads every day with a cigar in your mouth. Of course, this is an ideal situation. The reality is:

Trading is very inactive, and this spread is not so profitable. If you make more transactions, you need to hedge your risks. This risk management is also a delicate job. Today you may lose money on volatility, and tomorrow you may lose money on basis.

In fact, there are many market makers who are not risk-neutral. After all, when the market is not active and the exchange doesn't give much money, they still have to support their families. Some may gamble on volatility, some may want to harvest theta (whether they can harvest it, of course, is another story), and some high-end ones may engage in some strategies. Of course, some "smart people" have pondered devious ways, such as playing tricks. At this early stage, some people may do it in order to compete for rankings and rewards.

so this is a battlefield without smoke. Market-making business is a complex business, and you can't just find one or two excellent traders. First of all, you need a mature and stable market-making system. In addition to the system, you also need sufficient support from futures companies, including the resources of trading seats, the operation and maintenance of counter systems, the construction of trading lines, etc., in order to ensure the stability and speed of the market-making system.

at the same time, the market-making business is extremely strict with details. The details are mainly divided into two parts: technical details and transaction details.

There are many places that need to be deeply cultivated in technology. Market-making transactions are essentially high-frequency transactions, which require the system to have a faster speed of reporting and withdrawing orders, which can optimize possible flow control problems. System delay is also fatal, which may make you lose money in the market continuously. Therefore, a high-speed and low-delay market-making system is a must for business.

as for the details of the transaction, there are many things to consider, including the optimization and adjustment of the pricing model and quotation model in the business, the Greeks decomposition of daily positions, the decomposition of profit and loss, and the resumption of trading after the closing, etc. These details determine whether you lose money or make money. To do this well, it is impossible to rely on one or two people alone. You need to form a team of quantitative analysis, in terms of the fundamentals of contract varieties, pricing models, risk management, and

And the usual trading process is also a process of constantly managing risks. For example, if you suddenly buy a contract, you should think about whether you can sell it immediately. Many times, you can sell it at a higher price. If you can't sell it, you should see how the contract affects your risk and whether you need to hedge it immediately. When trading, you also need to observe the changes of the volatility curve all the time. Is the current curve normal? Is this point high or low? Should the volatility in March be higher than that in four months? What is the trend of volatility change? Is it going up or down? These are all things you have to think about. In fact, in the process of market making, you need to adjust the parameters of the volatility curve all the time, so that the curve can fit the market, and you also need to pay attention to risks all the time, otherwise you may be come to a bad end if you are not careful.