The article examines how market activity affects bid-ask spreads in the option market. A new theory called derivative hedge theory suggests that option spreads are linked to the ability of market makers to hedge their positions in the underlying market. The study found that option market volume does not significantly impact spreads, questioning the use of volume as a measure of liquidity. Option spreads are influenced by the liquidity of the underlying market and the speed of the option market. These results suggest that market makers can only imperfectly hedge their positions, leading to varying spreads in different market conditions.