eagL / order-book microstructure

Microprice and queue imbalance in binary contracts

On a liquid stock the last trade is a fine summary of the market. On an event contract quoted 42 bid, 49 ask, with eleven contracts on one side and four hundred on the other, the printed price is barely a rumor. These are the numbers that do better.

Midpoint versus microprice

The naive fair value is the midpoint, (bid + ask) / 2. The microprice weights each side by the size resting on the other: with heavy size on the bid and a thin ask, the true price is being pushed toward the ask, and the microprice says so before the midpoint moves. On binary contracts with wide spreads, the difference between the two is routinely larger than the edge a scanner claims to have found.

Depth and queue imbalance

Depth imbalance compares the total size resting on each side over the visible book. Queue imbalance asks the same question at the touch, where the next trade actually happens. They disagree in an informative way: balanced depth with a lopsided queue means the pressure is immediate; the reverse means the pressure is positional. Either way, a book leaning hard in one direction is telling you which way the next print goes, and a fill price computed without that lean is optimistic.

Liquidity elasticity

Elasticity asks what happens to your fill price as your size grows: walk the ladder and measure how fast the average degrades. A market can look deep at the touch and collapse two levels down. This is the number that turns "the screen says 45" into "45 for the first twenty contracts, 52 by the eightieth," which is the version of the price a position size can be built on.

Spread in basis points

A two-cent spread means something different at a 10-cent price than at a 50-cent price. Quoting the spread in basis points of the contract price normalizes it, so markets across venues and price ranges become comparable at a glance. On many event contracts the normalized spread alone exceeds any plausible model edge, which is a conclusion worth reaching before entering, not after.

How eagL applies this

eagL computes all four over the top eight levels a side, live, for Kalshi and Polymarket books, and feeds them into the fee-exact sizing described in the methodology. The practical consequence is the theme of the arbitrage page: most displayed edge is microstructure, not mispricing.