Strategy · Market Making
SCALP THIN SPREADS
NeutralDefined riskAdvanced
Overview
Place limit orders inside the bid-ask spread on liquid contracts. Capture the spread by providing liquidity to impatient market participants.
Setup
- 1.Pick the most liquid contracts (typically Fed, CPI, presidential vote share).
- 2.Place a buy 1 cent above the best bid and a sell 1 cent below the best ask.
- 3.Cancel and re-quote when the market moves more than 2 cents.
- 4.Cap inventory exposure at 2% of capital per contract.
- 5.Use APIs or scripted clients — manual scalping does not scale.
- 6.Exit positions at end of day to avoid overnight risk.
Max profit
1-3 cents per round-trip × turnover; high cumulative if executed thousands of times.
Max loss
Inventory P&L if the market trends against your accumulated position.
Breakeven
Captured spreads exceed losses on inventory drawdowns.
When to use
On the most liquid 5-10 contracts during high-volume sessions.
When to avoid
On illiquid contracts. Around binary catalyst windows. Without API access.