Order Books and Liquidity
Spreads, depth, slippage, market making and what settlement does to a position you still hold.
Order Books and Liquidity · 3 min readWhat the Spread Actually Costs YouThe gap between bid and offer is the largest cost on most event-market trades, and the only one that never appears on a statement. How to price it.
Order Books and Liquidity · 3 min readDepth, Slippage, and the Price You Actually GetThe quote is good for the size at the top of the book. Beyond that you walk the book, and the average price you pay is not the one you saw.
Order Books and Liquidity · 3 min readWhat Market Makers Do on an Event ExchangeSomebody is quoting both sides and carrying the risk of doing so. Understanding their problem explains most of what the order book looks like.
Order Books and Liquidity · 3 min readVolume and Open Interest Are Not the Same NumberOne counts how much changed hands, the other counts how much is outstanding. They tell you different things and conflating them misreads a market badly.
Order Books and Liquidity · 3 min readLimit Orders, Market Orders, and the Real Trade-OffCrossing the spread costs money you can measure. Waiting costs money you cannot. A practical guide to choosing, with the missed-fill cost included.
Order Books and Liquidity · 3 min readReading an Order Book ProperlyA book is more informative than a price. How to weight it, what a lopsided book means, and the patterns that tell you a quote is not to be trusted.
Order Books and Liquidity · 3 min readThin Market Warning SignsA checklist for spotting a market whose price is not a forecast, before you quote it, compare it or build anything on top of it.
Order Books and Liquidity · 3 min readWhat Settlement Does to a Position You Still HoldHolding to settlement means no exit, no spread on the way out, and a payout decided by a rule. The mechanics, and the ways they surprise people.
Order Books and Liquidity · 3 min readExit Early or Hold to SettlementTaking a profit before resolution frees capital and pays a spread. Holding pays no spread and ties up capital. The arithmetic that decides it.
Order Books and Liquidity · 3 min readOrder Books Versus Automated Market MakersTwo ways to make a market in an event contract. One always quotes and may quote badly; the other quotes well when there is interest and not at all otherwise.