Bid-Ask Spread

The bid-ask spread is the difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask). It represents the cost of trading immediately.

CLI:sf depth

Understanding Spreads

The spread is the toll you pay for instant execution. If the best bid is 42 cents and the best ask is 46 cents, the spread is 4 cents. You can:

Buy at the ask (46 cents) for immediate execution
Sell at the bid (42 cents) for immediate execution
Post a limit order between bid and ask and wait for a fill

Spread as a Cost

If you buy at 46 cents and immediately sell, you'd get 42 cents — losing 4 cents per contract. This means you need at least 4 points of edge just to break even on a round-trip trade.

What Drives Spread Width

Liquidity: More liquid markets have tighter spreads (1-3 cents). Illiquid markets can have 5-15 cent spreads.
Volatility: Spreads widen when the market is moving fast, because market makers face more risk.
Event proximity: Spreads often narrow as settlement approaches because uncertainty decreases.
Time of day: Kalshi spreads are often tightest during US market hours (9 AM - 4 PM ET).

Reading Spreads in the CLI

The sf depth command shows you the full orderbook including the current spread. When sf scan reports edge, it always accounts for the spread — showing you the executable edge after spread costs.

Spread Strategy

For markets with wide spreads, posting limit orders inside the spread is often better than crossing the spread. You sacrifice speed for a better price. For fast-moving markets (like during CPI releases), crossing the spread is necessary to get filled.

Example

sf depth KXRECSSNBER-26:

  BID (buy)              ASK (sell)
  150 contracts @ $0.27  80 contracts @ $0.30
  300 contracts @ $0.26  200 contracts @ $0.31
  500 contracts @ $0.25  400 contracts @ $0.32

Spread: $0.30 - $0.27 = $0.03 (3 cents)
Midpoint: $0.285

To buy 80 contracts immediately: pay $0.30 (cross the spread)
To buy 80 contracts cheaply: post bid at $0.28 and wait

Related Terms

Market Maker

A market maker is a participant who continuously provides both buy (bid) and sell (ask) orders on a prediction market, earning the spread in exchange for providing liquidity to other traders.

Slippage

Slippage is the difference between the expected execution price and the actual price at which a trade fills. It occurs when you trade larger quantities than available at the best price.

Bid and Ask Prices

The bid price is the highest price a buyer is currently willing to pay for a contract. The ask price is the lowest price a seller is currently willing to accept. Together they define the tradeable price range.

Market Depth

Market depth is the total quantity of resting orders at each price level in the orderbook. Deep markets can absorb large trades with minimal price impact; shallow markets cannot.

Liquidity

Liquidity is the ease with which you can buy or sell a prediction market contract without significantly affecting its price. Liquid markets have tight spreads, deep orderbooks, and high trading volume.

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