What Is the Spread in Prediction Markets? Bid-Ask Spread Explained
The spread is the difference between the highest buy price (bid) and lowest sell price (ask) in a prediction market. Tighter spreads mean lower trading costs.
Definition
The spread (or bid-ask spread) is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask).
For example, if the best bid for YES shares is $0.64 and the best ask is $0.66, the spread is $0.02 (or 2 cents).
Why the Spread Matters
The spread is your implicit trading cost. When you buy at the ask and later sell at the bid, you lose the spread even if the true probability hasn’t changed. Tighter spreads mean:
- Lower cost to enter and exit positions
- More accurate price signals
- Better capital efficiency
What Determines the Spread
- Liquidity — more market makers competing produces tighter spreads.
- Volatility — uncertain events have wider spreads because market makers demand more compensation for risk.
- Market design — order book markets (like Purrdict on Hyperliquid) typically have tighter spreads than AMM-based markets.
- Volume — heavily traded markets attract more liquidity providers, compressing spreads.
Typical Spreads by Platform
| Platform | Typical Spread | Market Type |
|---|---|---|
| Purrdict | $0.01-0.02 | CLOB on Hyperliquid |
| Polymarket | $0.01-0.03 | Hybrid CLOB |
| Kalshi | $0.01-0.04 | CLOB |
| AMM-based | $0.05-0.15 | Constant product |
Tips for Traders
- Use limit orders instead of market orders to avoid paying the full spread.
- Trade during high-activity periods when spreads tend to be tightest.
- Check the order book depth before placing large orders.