I've heard that option market makers make their bid ask spread as wide as the vega of the contract they are quoting. If the quoted spread is narrower than the vega of the option it is said that the price is competitive. Why is this? What is the basis for the rule of thumb?
So for example, if the at the money option has A vega of 10 the corrosponding market could be 1.10 bid 1.20 ask (it is 10 cents wide).