Just trying to understand something with the market pricing and how it works. There are literally thousands, if not millions of derivatives tied to say an index fund (which in turn are composed of a basket of underlying stocks). So say an index moves up 1 point. How is it that instantaneously all those derivatives (thousands of option chains, strike prices, calls, puts, etc, bid/ask/price change at the very second to account for that tick up). It's done so accurately within under a second that is astounding. so the question is: these are normal people adjusting their bids/asks according to that move in the underlying. First off, they can never do it that accurately and that timely, considering the complex equations and time-component which are behind Options prices, and all under a second. Are prices bid/ask updated by computers and placed there? But aren't individuals who set the bid/ask manually on those? Also what if in some obscure out of the money option strike, no one is interested in trading at all. Who then updates the bid/ask for those to reflect market efficiency?
Just trying to understand how millions of prices get changed to match the underlying in such a short sub-second time frame whether there are any interest even in some strikes or not. Is this what a Market-Maker is for? Even if all this is computerized, it would have to work at supremely fast speeds to make those calculations and update all those prices at sub-par seconds, every second. How does this all work?