Market Making and Trading Decisions

1.A customer wants to buy immediately from your 39.96 bid and 40.04 offer. What price do they trade at if your displayed size covers the order?

2.A stock is quoted 72.30 by 72.46. What are the midpoint and full spread?

3.A venue requires prices in increments of 0.05. Your model bid is 18.273 and you must round without paying more than the model bid. Where do you bid?

4.The book is 24.10 bid and 24.14 offered with a 0.01 tick. What is the highest passive bid you can post without matching the offer?

5.The best ask is 100 shares at 31.05 and the next is 200 at 31.08. What is the average price of a market buy for 250 shares, assuming the book is unchanged?

6.In a price-time-priority queue, 500 shares are ahead of your 200-share bid. A sell order executes 620 shares at that price with no intervening events. How much do you buy?

7.You post an offer at 52.18 behind 300 shares. The venue preserves queue position on a size reduction. What happens to your priority if you cut your offer from 100 shares to 60?

8.A buy limit order for 300 shares at 12.02 finds 100 at 12.01 and 100 at 12.02. It is marked immediate-or-cancel. What happens?

9.A buy limit for 300 shares at 12.02 is marked fill-or-kill. Only 200 shares are available at or below 12.02. What happens?

10.Two venues quote the same bid, but one has a much shorter queue. All else equal, which venue is more likely to fill your new passive bid first?

11.A sell order sweeps several bid levels. What explains its average fill being below the best bid observed before submission?

12.The best bid has 8,000 shares and the best ask has 2,000. Why might this imbalance be less informative than it looks?

13.A venue displays only 50 shares of an iceberg offer. Why might repeated trades at that price exceed 50 shares without the offer moving?

14.A best bid of 30.06 from one venue and best offer of 30.05 from another appear crossed in your screen. What should you check first?

15.You enter a post-only sell at 10.00 while the best bid is 10.01. The venue rejects marketable post-only orders. What happens?

16.The bid moves up one tick and the ask stays fixed. What happens to the midpoint and full spread?

17.A contract pays $50 if an event happens and $10 otherwise. Your probability for the event is 30%. What is risk-neutral fair value with no discounting?

18.An event contract pays $1 or zero. Your fair value moves from 0.42 to 0.55 after a verified update. With unchanged risk and desired spread, how should a fresh quote move?

19.A public release increases estimated volatility but leaves your expected value and inventory unchanged. Which quoting change addresses the new uncertainty directly?

20.Your fair value is 50.00. You sell at 50.03, and one second later the midpoint is 50.09. What is the signed one-second markout per share from your perspective?

21.You buy 80 shares at 9.96. Five seconds later the midpoint is 10.01. What is the signed markout in dollars before fees?

22.Most buys against your offer are followed by an upward price move, while sell fills show no corresponding pattern. Which diagnostic is most directly relevant?

23.A news feed reports an acquisition while the public quote remains unchanged. The report is unverified and your two-sided quote is live. Which action reduces exposure while you verify the report?

24.You quote two instruments using the same delayed reference feed. Both receive sharply unfavorable fills immediately after a release. What is the most likely shared mechanism to investigate?

25.Before any fills, you assign a 25% probability that an incoming buy is informed. If an informed buy has an 80% chance of arriving during the first second and an uninformed buy has a 20% chance, what is the informed probability given a first-second buy?

26.A competitive quote attracts twice as many fills as your old quote, but its average net markout per fill flips from positive to negative. Which comparison addresses the trade-off?

27.A 10,000-share buy print appears with an execution timestamp older than your current book. What matters most before using it as a new signal?

28.A venue signals a reopening auction after a halt. The last continuous-market price predates major news. Which price is more directly tied to current auction interest?

29.Why does spread capture computed at fill time often look better than realized spread measured after a delay?

30.You see unusual volume with little price movement. What evidence would better support an informed-flow explanation?

31.Your model expects a stock to rise 2 cents over the next minute. Crossing the spread plus fees costs 3 cents per share relative to midpoint, with no other benefit. What is the expected result of buying and marking in a minute?

32.A quoted midpoint rises by 4 cents after a buy fill, but the sector index implies a 5-cent rise for this stock over the same window. What is the sector-adjusted midpoint move?

33.You are long inventory and have no new fair-value signal. Which quote adjustment tends to encourage selling and discourage buying?

34.Your net position is −450 shares after a sequence of sells. How many shares must you buy to finish long 100 shares?

35.You are long 600 shares with a hard maximum of 700. Two independent buy quotes are both live. What must hold if both can fill before any cancellation?

36.A trader owns 3,000 shares of a stock priced at $40. The estimated dollar beta to an index is 1.25. What index dollar exposure offsets the estimated beta exposure?

37.A portfolio is long 12 calls, each with delta 0.40 and multiplier 100. How many underlying shares should you sell to make the portfolio approximately delta neutral?

38.Your option book is short gamma and initially delta hedged. After the underlying rises, what trade restores delta neutrality locally, all else equal?

39.Two correlated instruments usually track closely. You hedge a long in one with a short in the other, then the long drops while the short stays flat. What risk materialized?

40.You buy 100 futures at 107.50 and later sell at 107.42. Each full price point is worth $50 per contract. What is the realized P&L before fees?

41.You own 100 shares bought at $20 and 50 at $22. If all 150 are marked at $21, what is total unrealized P&L?

42.You hold a short position. The stock is rising and borrow has become hard to obtain. Which quote change directly reduces the chance of making the short bigger?

43.A long position can be unwound immediately at a 5-cent concession. Waiting offers 2 cents better expected execution but exposes you to a downside that breaches your remaining loss tolerance. Which action fits the stated constraint?

44.A desk marks positions to midpoint, but you need a conservative estimate of what a large long position could fetch immediately. What should you use?

45.You have a long position and make a sale at the offer. Price immediately drops. Relative to holding the original position, what did the sale do?

46.A nominally neutral portfolio is long $5 million of one stock and short $5 million of another. Why could an index rally still move its P&L materially?

47.At one venue a cancel request is pending. Your dashboard shows 200 shares working there and 350 shares of buy capacity left. How much extra buy size can you safely post before confirmation, assuming the 350 excludes the working order?

48.An ETF trades actively but its underlying basket is briefly illiquid. What changes about an ETF position hedge?

49.You buy at 19.98 and later sell at 20.02. Both are passive fills earning a rebate of 0.001 per share. What is net round-trip P&L per share?

50.You buy at 80.04 with a fee of 0.01 per share. At what sell price do you break even if the sale costs another 0.01 per share?

51.Two venues quote an identical 25.08 offer and have enough depth. Venue A charges 0.002 per share to take, Venue B charges 0.001. Where is the lower immediate buy cost if all else is equal?

52.You plan to sell 1,000 shares. At arrival, midpoint is 45.00. You sell 600 at 44.98 and 400 at 44.95. What is the shortfall versus arrival midpoint before fees?

53.Which order choice best fits a buy that must never execute above 17.35 but may wait for liquidity?

54.You can wait passively with an 80% chance of saving 2 cents, but a missed fill forces you to pay 12 cents extra relative to crossing now. What is the expected incremental cost of waiting?

55.A VWAP order aims to match the market's volume profile. Intraday volume turns out much heavier than expected near the close. Which problem can a fixed schedule face?

56.A participation strategy targets 8% of eligible market volume. If the interval records 250,000 eligible shares by the strategy's measure, what is its target quantity?

57.After a large buy program ends, the midpoint partially reverts toward the pre-trade level. What pattern is this consistent with?

58.You compare two buy algorithms. One trades in calm markets and the other is assigned urgent orders during volatile news. How should you improve the comparison?

59.You need to move a large block without broadcasting the full size. What trade-off accompanies slicing the order over time?

60.A passive order earns a maker rebate but routinely fills just before adverse moves. Which metric would show whether the rebate covers the loss?

61.A buy order crosses for 70 shares at 30.12 and 30 shares at 30.15. What is the volume-weighted fill price?

62.Your sell benchmark is 50.00. The gross fill is 50.01 but the fee is 0.015 per share. What is net performance relative to benchmark?

63.An execution strategy has low average slippage and occasional very large losses. Which review would expose the weakness more clearly?

64.A venue's top offer is cheaper by a tick but much smaller than your buy order. What calculation helps compare it with a deeper venue?

65.A trade gains $80 with probability 0.55 and loses $70 otherwise. What is expected P&L before costs?

66.A trade gains $30 on a win and loses $20 on a loss. What win probability gives zero expected P&L before costs?

67.Two proposed trades have the same expected P&L. One can lose $40,000 and the other at most $2,000. Your remaining loss limit is $5,000, and the stated outcomes are exhaustive. Which fits the limit?

68.A payout is $100 with 10% probability and zero otherwise. You buy it for $12. What is your expected return in dollars?

69.A stale signal and a verified real-time update disagree. The signal historically decays after 30 seconds and is now two minutes old. What is the best first step?

70.A positive expected-value strategy loses on its first three trades. What evidence would justify abandoning its underlying model?

71.You find an apparently profitable signal by testing 300 variants and choosing the one with the best backtest. What would most strengthen the evidence?

72.A trade's payoff depends on a scheduled binary announcement. Why might the desk cap position size even when the estimated edge is high?

73.A stock is halted and your hedge instrument keeps trading. The hedge moves sharply. What does this change about a mark based on the stock's last print?

74.You quote 4 cents wide in two stocks. One typically moves 1 cent before your quotes can refresh, the other 8 cents. What supports different quote widths?

75.A desk's average expected gain was 1 cent per share. An exchange fee change adds 1.5 cents per share to all its relevant executions. What is the new expected edge if nothing else changes?

76.You have orders on three venues during a spike in volatility. One venue starts rejecting cancels and you cannot verify which orders remain live. What action best contains risk?

77.You can trade before a scheduled release or wait. What does waiting buy you when prices will incorporate the release quickly?

78.A desk detects that a pricing input is ten minutes stale and outside tolerance. Which decision is most appropriate for quotes depending on it?

79.A strategy expects modest gains on most days but loses several months of gains in a plausible stress scenario. What should sizing account for?

80.You may place a trade with a 70% chance to win $4 or a 30% chance to lose $8. Fees are $0.60 per trade. What is net expected P&L?

81.A market-making desk earns $1,400 in spread capture, loses $900 from inventory moves, earns $200 from hedges, and pays $180 in fees. What is net P&L?

82.At the close, your signed P&L is +$20,000, but an overnight gap scenario projects −$65,000 from the close and your overnight loss budget is $50,000. How should you use the gap estimate?

83.A desk reports a flat end-of-day position but had large intraday swings. Which metric would best capture its largest inventory exposure?

84.A quote experiment lifts fill rate but inventory starts ending the day much more one-sided. What should be included in the evaluation?

85.A risk monitor uses contract counts across instruments with different multipliers. Why can equal counts be misleading?

86.You buy a futures contract at 100.15 and sell at 100.25. A tick is 0.05 and worth $12.50. What is the gross profit per contract?

87.An unusually strong day came from a single sector rally while the desk was long. Which analysis helps tell whether the quotes themselves improved?

88.Your fills normally arrive on both sides, but a feed issue suppresses all bid updates while offers still refresh. Which risk becomes more immediate if bids remain live?

89.You target 50 shares at most for a quoting trial. A test shows 50 shares live on each of three venues. What is the maximum new long position from flat if only bid orders fill?

90.A desk can hedge two positions separately or net them first. One carries +$80,000 of index exposure and the other −$50,000. What hedge offsets the combined exposure?

91.Market-wide spreads double after a scheduled report, and your fill rate drops at the same quoted width. Why should you inspect quote placement before changing size?

92.A stop order is triggered by a trade through its threshold during a price gap. Once it becomes a market sell, what determines execution?

93.A trader expects two market-making strategies to diversify each other. Both lose when volatility jumps. What test is most relevant before allocating risk to both?

94.Your broker reports an unexpected fill after you thought the book was flat. What should you reconcile first?

95.A position breaches its hard limit because a late fill arrives during a fast market. What is the next trading decision?

96.A trader sees higher profit after quoting wider, but wide quotes were used only on unusually quiet days. What would better test the effect of widening?

97.Your fair value is 100.00 and you quote 99.98 by 100.02. A reliable update raises fair value to 100.06. You also have a long position that calls for a 0.01 downward skew. With the same width, what is the new quote?

98.A buy fills at 60.10. The immediate midpoint is 60.12 and the midpoint five seconds later is 60.07. How do the two markouts compare?

99.You quote 20.00 by 20.04. A trade at 20.04 sells 400 of your shares and leaves you short 250. What was your inventory just before that fill?

100.With the stock at $50, a one-tick move is one cent. How many basis points of price is one tick?

101.You quote an event contract at 0.38 by 0.42 when fair value is 0.40. A verified update makes fair value 0.45. Which old side is immediately exposed to an unfavorable execution based on the new estimate?

102.A session replay shows orders only filling at the best bid when the trade size is less than the size already ahead of you. Under price-time priority and no cancellations, what is wrong?

103.You must reduce a long position by 700 shares by close. There are only 200 bid shares within your preferred price band, and time is nearly up. Which piece of information is essential to the next choice?

104.A trade has a modeled edge of 4 cents, all-in execution cost of 2 cents, and an additional expected hedge cost of 3 cents. What is expected net edge?