Option MM aren't required to post bids in the US. And yes, you can't sell a worthless option for zero
But that's just the point: it's not worthless for the very same reason the underlying is still trading at a discount to the non-binding proposed offer of $21: the buyout isn't carved in stone just yet. (and yes, this is where you come back and tell me to put in a $0.01 Bid if I'm so sure there's value.) Whatever, I don't want to get too far off into the weeds on that last point. And it's moot if MM's aren't required to actually post Bids (i thought there was some sort of requirement there...) Seems like I got my OP questions answered as well as I'm going to: that the time-value component of an option's premium does indeed get pretty noisy in the context of a proposed corporate action with an uncertain outcome.
Maybe not worthless, but worth less than the commission, exchange fees, and $.01/share. I think the MM requirements to post a bid/ask are with stocks, not options. It would be a tall ask to require that for all options in an option chain, and tough to define what didn't require a bid/ask since "far OTM" is defined by both the distance OTM and the volatility of the underlying, which is itself up to debate.
I think the MM's only have to provide a market for a certain amount of contracts, perhaps as low as 10 or something like that. If the demand his high then the can raise the price to cover the risk.
I was an Option MM on the Amex. It might be different now as I left in early 2010. I was required to sign up to quote a symbol. Once approved, I had to make 10 up markets, no more than $5 wide. I also had a requirement to do a large percentage of my volume in the name I signed up for. That way I could not use my position to not make good markets and just cherry pick trade with brokers in the crowd. The requirements to make "good" makets and be competitive were not high, but the fixed cost to do nothing was not small. I would say $10K/month all in for a sole prop trader right now and $5mm in captial would be a fair estimate.