What Happens When You Buy Call Options?

See what really happens after you click 'buy' on TSLA call options — order routing, market-maker hedging, gamma, clearing, and market impact at three scales.

You click "buy 100 TSLA $325 calls" and three seconds later your broker says "filled." On the surface, you bought a contract; someone sold one. Done.

Underneath, that single click triggers a cascade — order routing across exchanges, a market maker scrambling to hedge their new short position, a clearinghouse stepping in as counterparty, and a quiet ripple in the underlying stock itself. The size of your order determines how dramatic that cascade gets.

Here's what actually happens, walked through at three scales: 100 contracts (active retail), 1,000 contracts (high-net-worth or small fund), and 10,000 contracts (institutional block).

The Setup

For comparison, assume the same trade across all three sizes:

• Underlying: TSLA at $300
• Strike: $325 (about 8% out of the money)
• Expiration: 7 days out (weekly)
• Premium: ~$3.50 per share (TSLA's elevated IV makes weeklies expensive)
• Delta: ~0.22 (probability-weighted exposure per share)

| Size | Contracts | Shares Controlled | Premium Cost | Notional Exposure | |------|-----------|-------------------|--------------|-------------------| | Retail | 100 | 10,000 | ~$35,000 | $3.25M | | Active | 1,000 | 100,000 | ~$350,000 | $32.5M | | Block | 10,000 | 1,000,000 | ~$3.5M | $325M |

Same instrument. Wildly different footprints.

Step 1: Order Routing

There are 16 US options exchanges — CBOE, NASDAQ ISE, NYSE Amex, MIAX, BOX, and others. Your broker routes your order based on price, fees, and rebates.

At 100 contracts: Standard smart routing. Your order walks the National Best Bid/Offer (NBBO), often gets filled at a single exchange in under a second, sometimes with sub-penny price improvement from a wholesaler. Invisible.

At 1,000 contracts: Your broker's algorithm slices the order across multiple venues to avoid moving the displayed quote. Fill takes a few seconds. You may get pulled into price-improvement auctions where wholesalers compete for your flow.

At 10,000 contracts: Now you're in block territory. A market order would walk the book and pay a terrible price. Instead, the order is typically:

• Sliced algorithmically across all 16 venues over minutes
• Routed to a block desk that runs an RFQ (request for quote) to a handful of market makers, who bid for the entire order
• Sometimes negotiated upstairs between the broker and a dealer, then printed to the OPRA tape after the fact

In all three cases, the trade prints to OPRA (the options consolidated tape). Open interest at the $325 strike rises by your contract count.

Step 2: Who's on the Other Side?

Almost certainly a market maker — Citadel Securities, Susquehanna, Optiver, Wolverine, Jane Street, IMC, or one of a handful of others. They have continuous quoting obligations and they make their money on the bid-ask spread, not directional bets.

The moment they fill your order, they're now short the same number of calls you bought. They don't want that exposure. They want spread capture and a flat book.

Step 3: The Immediate Delta Hedge

A short call has negative delta. To neutralize, the market maker buys shares of TSLA — enough to offset the call's delta exposure.

The math: contracts × 100 shares × delta. With our 0.22 delta:

| Size | Hedge Shares | Hedge Notional | Visible Impact | |------|--------------|----------------|----------------| | 100 | 2,200 | ~$660K | None — buried in normal flow | | 1,000 | 22,000 | ~$6.6M | Small lift, maybe a tick or two | | 10,000 | 220,000 | ~$66M | A real 1-2 minute buying wave |

This buying happens within seconds via the MM's smart router. At every size, your call purchase mechanically creates an upward bid on TSLA itself — it's just a question of whether that bid is large enough to see on the chart.

Step 4: Gamma Management — The Interesting Part

Delta isn't fixed. As TSLA moves, delta changes. The rate of change is gamma, and for short-dated near-the-money options, gamma is enormous.

The dealer has to continuously rehedge as the stock drifts. If TSLA rises toward $325:

1. Delta climbs (say from 0.22 → 0.45 → 0.70)
2. The MM has to buy more shares to stay neutral
3. That buying lifts TSLA further
4. Delta climbs more
5. The MM buys more

This is the gamma squeeze feedback loop. It's most violent in the final two days before expiry, when gamma per dollar of premium peaks.

At 100 contracts, the loop exists but the buy increments are too small to feed back meaningfully — you're a rounding error in TSLA's daily volume (which runs 100M+ shares). At 1,000 contracts, the hedging churn becomes visible if TSLA approaches your strike. At 10,000 contracts, you're contributing real fuel to a potential squeeze, especially in the last 48 hours of life.

This is exactly why concentrated weekly OTM call buying — when many traders pile into the same strike — can move stocks more than the dollar amounts suggest they should.

Step 5: Clearing Through the OCC

The trade clears through the Options Clearing Corporation (OCC). The OCC steps in as central counterparty: it's the buyer to every seller and the seller to every buyer.

You don't actually face the market maker. You face the OCC. This removes counterparty risk and is why options markets keep functioning even when individual firms blow up.

This step is identical at all three sizes — clearing is one of the elegant invariants of the system.

Step 6: The Market Signal

Options flow is data, and the entire industry watches it.

100 contracts: Doesn't move the needle. Won't trigger unusual options activity (UOA) scanners. Just one of thousands of similar prints that day.

1,000 contracts: May show up on flow trackers (Cheddar Flow, UnusualWhales, FlowAlgo) if the strike is unusual or the volume exceeds open interest. Modest IV bump at that strike.

10,000 contracts: Definitely lights up every UOA scanner. Implied volatility at $325 jumps, and the bump ripples to adjacent strikes via skew. Other traders see the print and either pile in (assuming "smart money knows something") or fade it. Everyone else now pays more for $325 calls and nearby strikes — even if they had no idea who placed the original order.

Step 7: At Expiration

Two outcomes, identical mechanics at every size:

TSLA closes below $325: Your calls expire worthless. You lose 100% of the premium you paid. The market maker keeps the premium and gradually unwinds whatever residual hedge they accumulated (often selling shares back into the market on expiry day).

TSLA closes at or above $325: Your calls go in the money. You either:

• Get assigned: receive 10,000 / 100,000 / 1,000,000 shares at $325 (need $3.25M / $32.5M / $325M cash to take delivery), or
• Have your broker auto-close the position intraday for the realized gain, which is what most retail traders do

The market maker delivers the shares — which, thanks to gamma hedging through the week, they've gradually accumulated.

Why This Matters For You

Even at 100 contracts, your buy is not a passive event. It's a small but real input to TSLA's intraday price action via the MM's hedge. At 1,000+ contracts, the effect becomes measurable. At 10,000, you're a temporary character in TSLA's price discovery for the week.

A few practical takeaways:

• Liquidity matters more than you think. Tight bid-ask spreads on a 100-lot mean you keep a few hundred dollars; wide spreads on a 1,000-lot can cost you thousands.
• Watch open interest. Unusual prints relative to existing OI signal informed flow — sometimes worth following, sometimes a trap.
• Gamma is the silent driver. The reason short-dated OTM weeklies are so volatile is that the MM hedging machinery is most reactive there.
• You're trading against an obligation, not a view. The market maker doesn't think your strike is wrong. They just want to capture spread and stay flat. Their hedging behavior is mechanical, not opinionated.

The clean version: your buy doesn't just sit in a book. It triggers MM hedging that touches the underlying immediately and keeps touching it until expiry, with intensity scaling as the stock moves toward your strike — and as your order size grows.

Smallfolk's options tools let you model these scenarios end-to-end: pick a strike, see the implied delta and gamma, model expiry outcomes, and compare premium cost against breakeven. Before you click "buy," it pays to know exactly what cascade you're about to trigger.