WHO PROVIDES LIQUIDITY IN PM
Plain English
Behind every quote on Kalshi or Polymarket is a market maker quoting both sides. Understanding how they price helps you spot when their quotes are too wide or stale — your opportunity to capture spread.
Going deeper
Market makers in PM use models incorporating base rates, news flow, order-book imbalance, and inventory risk to set bid/ask. They earn the spread plus rebate incentives from venues. When a market maker's model is wrong (rare event, news-driven mis-pricing), retail traders can pick them off. When a market maker pulls quotes (stress events, technical issues), spreads widen and slippage spikes. Sophisticated retail traders watch for momentary mis-pricings as MM bots reset after big news.
Examples
Spread widens during news
After a surprise Fed announcement, MM spreads on Fed-cut contracts jump from 1c to 8c. Limit orders inside the wide spread fill from impatient market participants.
Stale quote opportunity
An overnight news item shifts probabilities, but the morning MM bot hasn't fully repriced yet. The first 2-3 minutes after major news is often the best time to capture spread.