Market Making Position Limit Interview Questions
Market making position limit interview questions for quoting near inventory caps, reducing exposure, and explaining constrained decisions.
Candidates working on risk-constrained trading games.
Position limits cap exposure
A position limit is a hard or soft cap on how much inventory you can hold. It changes which trades you should encourage.
Quote away from the limit
Near a long limit, make additional buying less likely and selling more likely. Near a short limit, do the reverse.
Concrete example
If your maximum long position is 10 and you already hold 10, quoting a strong bid for more inventory is hard to defend.
Size can go to zero
If the game allows it, you may stop showing size on the side that would breach the limit while continuing to quote the risk-reducing side.
Explain the constraint
A constrained quote is not a lack of conviction. It is a response to the current position and remaining risk budget.
Common mistakes
Candidates often keep optimizing edge as if position were flat. Near a limit, risk control can dominate one-trade expected value.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.