# How Does a "Market Maker" Profit from the Bid-Ask Spread? ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

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## How Does a “Market Maker” Profit from the Bid-Ask Spread?

A market maker profits by simultaneously quoting both a bid (buy) price and an ask (sell) price for an asset. They aim to buy at the lower bid price and immediately sell at the higher ask price.

The difference between the two prices, the bid-ask spread, is their profit margin. They profit by providing liquidity and capturing the spread on high-volume transactions.

- [How Does ‘Bid-Ask Spread’ Relate to the Profitability of a Market Maker?](https://learn.greeks.live/path/how-does-bid-ask-spread-relate-to-the-profitability-of-a-market-maker/)

- [How Does Front-Running Risk Affect the Bid-Ask Spread for Crypto Derivatives?](https://learn.greeks.live/path/how-does-front-running-risk-affect-the-bid-ask-spread-for-crypto-derivatives/)

- [What Is a “Market Maker” and What Is Their Role in Reducing the Bid-Ask Spread?](https://learn.greeks.live/path/what-is-a-market-maker-and-what-is-their-role-in-reducing-the-bid-ask-spread/)

- [What Is the Role of a Market Maker in Narrowing the Bid-Ask Spread?](https://learn.greeks.live/path/what-is-the-role-of-a-market-maker-in-narrowing-the-bid-ask-spread/)

- [What Is the Role of a Market Maker in Setting the Bid-Offer Spread for a Financial Derivative?](https://learn.greeks.live/path/what-is-the-role-of-a-market-maker-in-setting-the-bid-offer-spread-for-a-financial-derivative/)

- [How Is the Bid-Ask Spread the Implicit Cost of a Trade for the Market Maker?](https://learn.greeks.live/path/how-is-the-bid-ask-spread-the-implicit-cost-of-a-trade-for-the-market-maker/)

- [How Does a Market Maker Profit from the Bid-Ask Spread While Gamma Hedging?](https://learn.greeks.live/path/how-does-a-market-maker-profit-from-the-bid-ask-spread-while-gamma-hedging/)

- [What Is the Profit Mechanism for a Market Maker?](https://learn.greeks.live/path/what-is-the-profit-mechanism-for-a-market-maker/)

## Glossar

### [Large Bid-Ask Spread](https://learn.greeks.live/area/large-bid-ask-spread/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Indicator ⎊ A large Bid-Ask Spread serves as a direct indicator of poor market liquidity and elevated transaction costs within a specific cryptocurrency derivative or options contract.

### [Capturing the Spread](https://learn.greeks.live/area/capturing-the-spread/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Arbitrage ⎊ Capturing the spread, within cryptocurrency derivatives, represents a strategy exploiting temporary price discrepancies for the same asset across different exchanges or derivative contracts.

## Discover More

### [How Does the Time until Expiration (Time Decay) Influence the Options Bid-Ask Spread?](https://learn.greeks.live/path/how-does-the-time-until-expiration-time-decay-influence-the-options-bid-ask-spread/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Time until Expiration (Time Decay) Influence the Options Bid-Ask Spread?](https://learn.greeks.live/wp-content/uploads/2025/10/Geometric-Equilibrium-Visualization-of-Implied-Volatility-Surface-Contraction-in-Decentralized-Finance-Structures.webp)

Options near expiration have high time decay and risk, leading market makers to widen the bid-ask spread and increase slippage.

### [What Is the Relationship between the Bid-Offer Spread and the 'Cost of Immediacy' in Derivatives Trading?](https://learn.greeks.live/path/what-is-the-relationship-between-the-bid-offer-spread-and-the-cost-of-immediacy-in-derivatives-trading/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Relationship between the Bid-Offer Spread and the 'Cost of Immediacy' in Derivatives Trading?](https://learn.greeks.live/wp-content/uploads/2025/10/Tungsten-Carbide-Ring-on-Hydroplaned-Metal-Surface-Illustrating-Impermanent-Liquidity-Pool-Volatility-Dynamics.webp)

The bid-offer spread represents the transaction cost a trader pays for the immediate execution of a market order.

### [Can a Limit Order Ever Execute outside the Current Bid-Ask Spread?](https://learn.greeks.live/path/can-a-limit-order-ever-execute-outside-the-current-bid-ask-spread/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Can a Limit Order Ever Execute outside the Current Bid-Ask Spread?](https://learn.greeks.live/wp-content/uploads/2025/10/Exotic-Option-Payoff-Structures-Visualized-Through-Converging-Cross-Sectional-Asset-Structures.webp)

No, a limit order is set to execute at the specified price or a better price, keeping execution within the spread's boundaries.

### [What Is the Impact of a 'Flash Crash' on the Bid-Ask Spread of a Cryptocurrency?](https://learn.greeks.live/path/what-is-the-impact-of-a-flash-crash-on-the-bid-ask-spread-of-a-cryptocurrency/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Impact of a 'Flash Crash' on the Bid-Ask Spread of a Cryptocurrency?](https://learn.greeks.live/wp-content/uploads/2025/10/Intertwined-High-Frequency-Trading-Algorithms-Visualized-Through-Lemniscate-Volatility-Surface-Projections.webp)

A flash crash vaporizes liquidity, causing the gap between buy and sell prices to explode.

### [How Does High Volatility Typically Affect the Bid-Ask Spread in Options?](https://learn.greeks.live/path/how-does-high-volatility-typically-affect-the-bid-ask-spread-in-options/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does High Volatility Typically Affect the Bid-Ask Spread in Options?](https://learn.greeks.live/wp-content/uploads/2025/10/Automated-Market-Maker-Mechanism-Interaction-with-Perpetual-Swaps-Settlement-Protocol-Visualization.webp)

High volatility increases market maker risk, causing them to widen the bid-ask spread to protect capital.

### [What Is the Role of a Market Maker in Narrowing the Bid-Ask Spread?](https://learn.greeks.live/path/what-is-the-role-of-a-market-maker-in-narrowing-the-bid-ask-spread/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Role of a Market Maker in Narrowing the Bid-Ask Spread?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Autonomous-Organization-Governance-Mechanism-Propeller-Blades-Simulating-High-Frequency-Liquidity-Provision.webp)

Market makers narrow the spread by providing continuous liquidity (bid/ask quotes), profiting from the difference.

### [In High-Frequency Trading (HFT), How Quickly Do Algorithms Adjust the Bid-Offer Spread in Response to Volatility Spikes?](https://learn.greeks.live/path/in-high-frequency-trading-hft-how-quickly-do-algorithms-adjust-the-bid-offer-spread-in-response-to-volatility-spikes/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![In High-Frequency Trading (HFT), How Quickly Do Algorithms Adjust the Bid-Offer Spread in Response to Volatility Spikes?](https://learn.greeks.live/wp-content/uploads/2025/10/Crystalline-Delta-Hedging-Structures-Approaching-Lunar-Settlement-Infrastructure-High-Frequency-Trading-Protocols.webp)

HFT algorithms adjust spreads instantaneously (microsecond scale) by widening them during volatility spikes to manage sudden risk.

### [How Does the Bid-Ask Spread on a CEX Compare to the Effective Spread on an AMM?](https://learn.greeks.live/path/how-does-the-bid-ask-spread-on-a-cex-compare-to-the-effective-spread-on-an-amm/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Bid-Ask Spread on a CEX Compare to the Effective Spread on an AMM?](https://learn.greeks.live/wp-content/uploads/2025/10/Optical-Medium-Delamination-Reflecting-Asymmetric-Futures-Curve-Volatility-Skew.webp)

CEX spread is explicit; AMM spread is implicit, determined by the trading fee plus variable slippage.

### [How Can a Trader Use the 'Market Depth' Chart in Conjunction with the Bid-Ask Spread to Assess Liquidity?](https://learn.greeks.live/path/how-can-a-trader-use-the-market-depth-chart-in-conjunction-with-the-bid-ask-spread-to-assess-liquidity/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Can a Trader Use the 'Market Depth' Chart in Conjunction with the Bid-Ask Spread to Assess Liquidity?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Metrology-Stylus-Contacting-Simulated-Crystal-Stratagem-in-Decentralized-Exchange-Volatility-Hedging.webp)

The bid-ask spread is the tip of the iceberg; the market depth chart shows you the whole thing.

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**Original URL:** https://learn.greeks.live/learn/how-does-a-market-maker-profit-from-the-bid-ask-spread/
