According to a 2014 paper by SMU Assistant Professor of Finance Hu Jianfeng, one way that options influence equities is by market makers hedging the buying and selling of puts and calls with transactions in the underlying stock. “One big challenge for options market makers is that once someone trades against them, they need to hedge, and their counterparty also knows that,” Assistant Prof Hu said in an interview. “Potentially, the counterparty can front-run their transaction in the stock market, which is very dangerous, particularly in large trades. So market makers must constantly adjust their hedging.”