Definition
An orderbook lists every resting order for one contract. Bids are offers to buy, asks are offers to sell. Orders at the same price are grouped into a level with a total size. Trading against the book means taking the asks (to buy) or the bids (to sell), starting from the best price and moving outward.
Reading one
- Best ask: the lowest price someone will sell at, which is the price you pay to buy immediately
- Best bid: the highest price someone will buy at, which is the price you get to sell immediately
- Depth: the size available at each level, which decides how much you can trade at the quoted price
- Bid-ask gap: the distance between the best bid and the best ask, a cost every taker pays
Why arbitrage needs the book, not the headline price
The price shown for a market is often a midpoint or last trade, neither of which you can actually trade at. An arbitrage gap computed from those can vanish once you price each leg at the real ask for your size. A gap is only usable if both books have enough depth at the prices that create it; see slippage and partial fill.
One book per platform
Each platform keeps its own orderbook, so cross-platform arbitrage always involves two independent books that don't correct each other. Polymarket and Kalshi both run a central limit order book; see CLOB. The size of a trade is capped by the thinner of the two books.