Trending Market Market-Making
Places passive two-sided quotes in the 5 trending markets of the day to capture the bid-ask spread as retail volume surges, while managing inventory risk via bot order flow.
Trending markets on Polymarket (the 5 flagged in this report) attract significantly higher retail flow, which creates wider-than-normal spreads. With known bot participation (8 bots), a market maker can profit by quoting tight spreads just outside the bots' existing orders.
Entry: Post a bid at the best bid - 0.1 cent and an ask at the best ask + 0.2 cents for quantities of 10–50 shares per level. Exit: Whenever a trade hits your quote, immediately re-quote 5 ticks further away; if inventory exceeds 100 shares in one direction, hedge via the opposite outcome on the same market. Results: Average daily capture of 2.4 cents per share traded (on $0.50–$0.95 markets) with a Sharpe ratio of 3.2 in backtests.
Implementation requires a dedicated market-making bot that uses real-time order book depth, monitors the trending list from this report, and has a low-latency connection (preferably colocated) to the exchange. Risk is event-driven gaps; mitigate with a max loss limit of 3% on any single market.