Market Making#071

Inventory-Skew Mean-Reversion Quoting

You quote evenly on both sides only when your position is flat. As you accumulate one outcome token, you tilt both your buy and sell quotes to encourage trades that shrink the position back toward neutral, even paying a little to do so, before resolution risk concentrates. The edge is capturing the spread while keeping a tight cap on directional exposure to a binary outcome.

What you need to run it

Real-time position/inventory tracker per outcome token
Inventory-to-skew control function with hard caps
Two-sided quoting engine
Reservation-price model (Avellaneda-Stoikov analog)

Where this applies

Markets on Polymarket where inventory-skew mean-reversion quoting is the natural play:

Will Argentina win its next 2026 World Cup match?
Will the Fed hold rates at the September 2026 FOMC meeting?
Will Ethereum exceed $5k on July 15, 2026?

Capabilities this demands

Custom code / APIModel / quantRisk managementSignificant capital

At a glance

CategoryMarket Making

Requirements4

CapabilitiesCustom code / API, Model / quant, Risk management, Significant capital

VenuePolymarket (CLOB, Polygon)

Build it

Related market making strategies

This is documentation, not advice. Poly Research & Robotics publishes how these strategies work because the method should be checkable — not as a recommendation to trade them. See the full strategy database (147 strategies) or the data resources directory.