i understand how a options market maker maintains gamma and delta neutrality thoughout the day (buying and selling hedging stock and options). these questions are directed towards professionals CURRENTLY in the business or aware of how it works, especially w/ automated and electronic trading models. not looking for an outdated book that explains how market makers hedged positions 15 yrs ago. but overnight gap risk would make it very difficult for an options market maker (I'd imagine) leaving positions open as a big overnight move would significantly change his net gamma and net delta position. so 1: how does the options market maker even profit if he must buy so much stock and options at potentially disadvantageous prices in order to keep hedged? [is it all in volume on a few cents spreads?] 2: on a gigantic book, which for example on many stocks, implies retail as net long lots of options and MM short positions (initially), how does this huge imbalance affect MMs in their ability to hedge at appropriate prices? i assume in oversimplified manner if someone buys 10 deep otm calls at a net delta of 100, the MM maintains 100 shares (or closer itm calls of equal delta) and 2 atm 50 delta puts to hedge the position. As the position moves against the MM, he may buy more calls or stock to hedge the position. Likewise I assume an MM may be net short plenty of puts from the same retail public, so often his call sales result in him closing his short put positions to properly hedge. Correct? 3: But despite all of this, how does an options MM not get whacked when despite ending the day delta neutral, a buyout occurs and a huge gap happens ?? gamma neutrality could solve this, but I'd imagine its almost impossible to stay continually gamma and delta neutral without losing money (since all the hedging activity would most likely result in loss of edge). True? Or is this hedging and potentially gap loss offset by maintaining a large inventory to always pull hedges from, and by being statistically usually short theta? 4: question of internals: on a stock like AAPL or GOOG, how many market makers are there? and are they entirely computer automated or is there a manual human component. 5: are MMs ever generally exposed to being terribly long theta, where the public and retail market are generally net sellers of premium? What situation does this create? 6: any statistics available on how much options activity on heavily traded stocks is not between public and MMs, and directly between two entities excluding the MM? (i assume this occurs more heavily traded stocks that have huge volumes on both sides) Interested, since I'd assume heavy open interests where MMs aren't one side would result in less hedging activity on behalf of the holders of their positions. Good assumption?