Market Making#005

Market Making / Liquidity Provision

Instead of betting on an outcome, you post buy and sell orders on both sides of a market and earn the small gap between them (the bid/ask spread) as other traders trade against you. You make money on the spread over many fills, like a shop earning markup on volume. The main risk is inventory: if you end up holding too much of one side, you can lose if the price runs against you, so a fair-value estimate and position limits keep you balanced.

What you need to run it

Bot that continuously quotes and re-quotes around fair value
Inventory and position limits to cap directional exposure
A fair-value model to anchor quote midpoint

Where this applies

Markets on Polymarket where market making / liquidity provision is the natural play:

Will Bitcoin be up at 5pm ET today?
Will the Knicks beat the Heat tonight?
Will Solana close above $200 on July 31, 2026?

Capabilities this demands

Custom code / APIModel / quantSignificant capital

At a glance

CategoryMarket Making

Requirements3

CapabilitiesCustom code / API, Model / quant, Significant capital

VenuePolymarket (CLOB, Polygon)

Build it

Related market making strategies

This is documentation, not advice. Poly Research & Robotics publishes how these strategies work because the method should be checkable — not as a recommendation to trade them. See the full strategy database (297 strategies) or the data feeds directory.