Our AMM is fully committed to providing liquidity to the market, however there is no limitation if market participants (including market makers) want to post better prices, or trade against the AMM.
From an end-user perspective, there will be no clear distinction as to whether your trade was executed against another trader or the AMM. When the orderbook thins out in terms of active market participant liquidity then orders will continue to get filled by the AMM, which will be taking trades at a favourable price.
LPs who invest their funds in the options AMM pool will be rewarded from both the profits of the AMM strategy (since it typically charges a favourable spread and also will collect liquidation premiums) as well through issuance of Zeta tokens.
No, unlike certain DeFi options protocols that only allow options to be written in a one-sided manner by the AMM, we allow both active market participants as well as the passive AMM strategy to sell options.
This will be an area of intense scrutiny for us, and we will aim to stress-test our engine thoroughly. The good news is that by building on Solana we can build a very performant, low-latency liquidation engine. We are optimistic this will work well as other Solana projects such as Mango Markets have been able to capably handle mass liquidation events as of recent.