Quant Memo
Market Making/●●●●●

How wide a spread can your edge afford?

Your model predicts the mid will rise about 55 cents. You will enter now and exit later.

If both legs are market orders, what is the widest full spread you can face and still profit on average? How does the answer change if you can exit passively?

Show a hint

Round-trip cost with two market orders equals the full spread. Set edge above cost and solve.

Your answer

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