// GLOSSARY

Spread (bid-ask spread)

The gap between the best bid and best ask — e.g. 42¢ bid / 45¢ ask is a 3¢ spread. The immediate cost of trading now rather than waiting: takers pay it, makers earn it. In thin prediction markets, spreads are often wide relative to any edge.

The spread is what the market charges for immediacy. If a contract shows 42¢ bid / 45¢ ask, buying now costs 45¢ while selling now fetches 42¢ — a round trip loses 3¢ before anything else happens.

Worked example

A market's fair value is arguably 43.5¢ (the mid). You buy at the 45¢ ask: you've paid 1.5¢ of half-spread for immediacy. Do that on both entry and exit and the full 3¢ spread comes out of your P&L — on a contract capped at $1, that's 3% of maximum value, before fees.

Why prediction-market spreads run wide

Thin books, episodic interest, and event risk make quoting hazardous, so makers demand more. Spreads often widen dramatically near resolution or overnight. This is also the maker's revenue: earning the spread while managing inventory is the business described in prediction market making 101. For takers, the spread is the first — and most avoidable — component of slippage.