What Is the Market Making Game?
The market making game is one of the most common and decisive stages in trading interviews at firms like Optiver, IMC, Flow Traders, Jane Street, and Akuna Capital. It simulates the core activity of a market maker: quoting a bid and ask price on an asset whose true value you do not know, then updating your quotes as new information is revealed.
The game tests whether you can think probabilistically under pressure, manage risk on the fly, and make quick decisions with incomplete information. It is the closest thing in an interview to what you would actually do on a trading desk.
How the Game Works
The most common version uses a deck of cards. A subset of cards is drawn and their values are summed to create an unknown total. You must quote a market, meaning a price you are willing to buy at (your bid) and a price you are willing to sell at (your ask), on what you think that total is.
A typical setup might look like this:
- 10 cards are drawn from a standard deck (Ace = 1, Jack = 11, Queen = 12, King = 13, jokers removed)
- Cards are revealed one at a time
- After each reveal, you must quote a new bid and ask
- The interviewer (or other candidates) can hit your bid or lift your ask at any time, forcing you into a trade
- At the end, the true sum is revealed and your profit or loss is calculated
Some firms use variations: dice rolls, colored balls drawn from a bag, or entirely custom setups. The mechanics change but the core skill being tested is always the same.
The Math Behind Your Quotes
Your midpoint (the center of your bid-ask spread) should always be your best estimate of the expected value given the information you have. Before any cards are revealed, the expected value of a single card from a standard deck is 7, so 10 cards would have an expected sum of 70.
As cards are revealed, you update your estimate. If the first three cards revealed are King, Queen, and 10 (total 35), the remaining 7 cards are drawn from the 49 remaining cards. Calculate the expected value of those 49 cards and multiply by 7, then add 35. This is your new midpoint.
The key insight is that each revealed card changes both your expected value and your uncertainty. Early in the game, there is more uncertainty so your spread should be wider. As more cards are revealed, your estimate becomes more precise and your spread can tighten.
Setting Your Spread
The width of your bid-ask spread is where risk management meets strategy. A wider spread protects you from being picked off when you are wrong, but a tighter spread means you trade more often and earn the spread more frequently.
Factors that should influence your spread width:
- Uncertainty: More unknown cards means wider spread. As information is revealed, tighten up.
- Your current position: If you have bought a lot and are long, you should shade your quotes lower (lower bid and ask) to reduce your exposure. If you are short, shade higher.
- Who you are trading against: If other candidates have better information or are more aggressive, a wider spread protects you.
- Variance of remaining outcomes: High variance in possible outcomes justifies a wider spread.
A common beginner mistake is keeping the same spread width throughout the entire game. Your spread should be dynamic and respond to changing conditions.
Position Management
Tracking your position is just as important as setting good prices. Every time someone hits your bid, you have bought units. Every time someone lifts your ask, you have sold. Your running position determines your risk exposure.
Keep a mental (or written, if allowed) tally of:
- Your net position (long or short)
- Your average entry price
- Your current profit and loss based on where your midpoint is
If you find yourself with a large position in one direction, you should actively try to reduce it by shading your quotes. Being long 20 units when the true value could swing by 30 points is a dangerous spot. The interviewers are watching whether you recognize this and adjust accordingly.
Bayesian Updating in Practice
The game is fundamentally an exercise in Bayesian reasoning. Each new piece of information should cause you to update your beliefs about the true value. This sounds straightforward in theory, but doing it quickly and accurately under pressure is the challenge.
Practice these mental shortcuts:
- Running expected value: Keep a running total of revealed cards and calculate the expected contribution of remaining cards. For a standard deck, the average card value is 7, so if 4 cards are revealed summing to 30, your estimate for the remaining 6 is 30 + (6 × adjusted average of remaining deck).
- Adjusting for removed cards: When high cards are revealed, the remaining deck skews lower. When low cards are revealed, it skews higher. Quickly estimate whether revealed cards are above or below average and adjust your expected value for the remainder.
- Symmetry arguments: If the revealed information is roughly in line with expectations, your midpoint should not move much. Big updates happen when surprising cards are revealed.
Common Mistakes
- Not updating fast enough: Some candidates stick to their initial estimate too long. Every new card should move your midpoint.
- Ignoring position risk: Quoting fair prices while sitting on a massive long or short position is how you blow up. Always shade your quotes toward reducing your position.
- Symmetric spreads when your position is not flat: If you are long, your ask should be closer to your midpoint than your bid, incentivizing sells that reduce your exposure.
- Freezing under pressure: The game moves fast. If you take too long to quote, you signal indecisiveness. Practice making quick estimates even if they are not perfect.
- Forgetting the spread is your edge: You make money by buying below fair value and selling above it. If your spread is too tight, a single bad trade wipes out many good ones. If too wide, you never trade.
How to Practice
The best way to prepare for the market making game is to simulate it with friends. Here is a simple setup:
- Use a standard deck of cards. Remove jokers. Assign values Ace through King as 1 through 13.
- One person acts as the exchange: draws 10 cards face down, reveals them one at a time.
- Other players quote bid-ask markets after each reveal.
- The exchange can trade with any player at their quoted prices.
- After all cards are revealed, calculate the true sum and settle all positions.
Run this 10 to 20 times and you will develop the intuition for when to tighten your spread, when to shade your quotes, and how to manage a growing position. Track your P&L across rounds to see if you are consistently profitable.
For solo practice, deal out cards and practice calculating expected values quickly as each card is revealed. Time yourself to build speed. You can also practice the underlying math skills with our mental math tool and probability questions.
What Interviewers Are Really Evaluating
Beyond the math, interviewers are watching for:
- Composure: Can you stay calm when you take a bad trade or your position moves against you?
- Adaptability: Do you adjust your strategy as conditions change, or do you stick rigidly to one approach?
- Communication: Can you clearly and quickly state your market? Hesitation and mumbling are red flags.
- Risk awareness: Do you know when you are in a dangerous position and take action to fix it?
- Competitiveness: Are you engaged and trying to win, or passively going through the motions?
The market making game is where firms separate candidates who understand trading in theory from those who can actually do it under pressure. Dedicated practice is the best way to make sure you are in the second group.