The spread is the gap between the highest price a buyer will pay and the lowest a seller will accept. It is the immediate cost of trading now rather than waiting: a taker crosses it, a maker collects it. On thin prediction markets the spread is often the largest single cost in a strategy.
Spread is not constant. It widens around scheduled events, around the close of a short-cycle market, and whenever makers pull quotes because they suspect informed flow. A backtest that assumes a fixed spread will systematically overstate the profitability of anything that trades at those moments.
Backtesting with a single fixed spread. Spreads widen at precisely the moments most strategies want to trade — around events and near a cycle close — so a flat assumption flatters exactly the trades that are hardest to do.
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