Initially LPs deposit a collateral asset into the SIREN AMM pool, e.g. for WBTC/USDC calls the collateral asset is WBTC. When traders buy options from the SIREN AMM, the collateral in the pool is used to mint a new token pair (a bToken, which stands for buyToken, and a wToken, which stands for writeToken). bTokens are sent to the buyer while wTokens stay in the pool. When buyers make trades they pay a premium in the collateral asset. In essence, over time, LPs become covered option writers in a passive way, automatically underwriting contracts for which there is demand.
At the core of the system is a MinterAmm smart contract. Each MinterAmm can trade up to 6 SIREN options contracts, each sharing the same collateral and payment tokens. For example, one MinterAmm contract can trade multiple WBTC/USDC calls, while another one can trade multiple WBTC/USDC puts.
Note that SIREN AMM v2 only trades bTokens, but not wTokens. Trading of wTokens may become available in the future.