Wide vs Tight Quotes in Market Making Interviews
Wide vs tight quotes in market making interviews, covering uncertainty, competition, fill probability, adverse selection, and inventory.
Candidates calibrating spread decisions.
Tight quotes trade more but protect less
A tight quote is more competitive and more likely to fill, but leaves less room for fair-value error and selection risk.
Wide quotes protect but may not trade
A wide quote gives more cushion but can produce little flow or look uncompetitive in quote competition.
Concrete example
Around fair value 100, 99 at 101 is tight and 95 at 105 is wide. The better quote depends on uncertainty, inventory, and objective.
Inventory changes spread choice
Near a risk limit, a wide or skewed quote may be justified even if the fair value estimate is unchanged.
Competition changes spread choice
If other quotes are tight, a very wide quote may never trade. Decide whether no trade is acceptable.
Common mistakes
Candidates often think tight equals confident and wide equals cautious. The quote should follow the game state.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.