This study examines two different option markets to test whether differences in the level of adverse selection faced by market makers affect the size of bid–ask spreads. The data are from bank‐issued options that trade on EuWax, where market makers face little adverse selection and...

This paper examines two different option markets to test whether differences in the level of adverse selection faced by market makers affects the size of bid-ask spreads. The data are from bank-issued options that trade on EuWax, where market makers face little adverse selection and traditional...