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I understand that when buying an option through an exchange, you get matched with someone selling the same option in the order book, and the trade occurs.

Now, let's suppose that through my broker I get access to options which currently have no open interest, volume, or orders on the order book:

Option without open interest

If I were to buy this option, what price would I be paying? Who would issue / sell me the option?

Would it simply add a buy order to the order book? If this is the case, who would be able to sell me the option if you can't buy them in the first place? I.E, who creates the option?

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The market maker is responsible for providing liquidity. The option exchanges have a list of minimum requirements which the market maker must follow (quote width, minimum number of contracts offered, etc.).

You may not like the price he offers or the number of contracts available at that price. If not, you place a limit order at your desired price, and it goes on the order book.

In order for your order to execute, it would require a willing counterparty to take the other side of the trade at your price (trader or market maker).

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  • "minimum requirements which the market maker must follow" -- but according to OP (see screenshot) there is no offer from a market maker at all. No bid, no ask. Your answer doesn't address this. Perhaps this is an option that has ceased trading entirely but is still visible on OP's quote platform.
    – nanoman
    Oct 2, 2022 at 21:09
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    @nanoman - The OP posts some unsourced screenshot and you take that as the gospel that there is no offer from the market maker? Each option exchange has its own set of regulations. The CBOE determines the minimum number of contracts on a class-by-class basis, with a minimum of one contract offered by the market maker (buy and sell). Google the different option exchanges for specific details. Oct 2, 2022 at 23:16
  • Okay, then you could state in the answer that you think OP's screenshot has wrong info and the complete absence of a bid/ask is not possible. It's a key part of the question, mistaken or not, so IMO you should address it somehow.
    – nanoman
    Oct 3, 2022 at 0:29
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If I were to buy this option, what price would I be paying? Who would issue / sell me the option?

Assuming that this is really an option that is open for trading but has no bid/ask (as opposed to a quote glitch or a market that's closed): You would need to place a limit buy order (specifying the price at which you will buy) and then it would need to be matched by someone placing a sell order.

Would it simply add a buy order to the order book?

Yes.

If this is the case, who would be able to sell me the option if you can't buy them in the first place? I.E, who creates the option?

The total net position in an option is always zero. Open interest is the number of long contracts and is also the number of short contracts. If open interest is currently zero, then only trades to open are possible (since no one has a position to close). If you buy to open and someone else sells to open, then a contract comes into being, increasing open interest.

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