Calculate your market making cost
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Retainer
Token loan with call options
Liquidity budget
How does the option value change with volatility?
The same loan costs more when the token is more volatile, and new tokens are volatile. The median new listing in TDMM's data has annualised volatility of 166%.
| Volatility | Term | Option value | Against a $180,000 retainer |
|---|---|---|---|
| 88% | 12 months | $274,990 | 1.5 times |
| 120% | 12 months | $394,765 | 2.2 times |
| 166% | 12 months | $549,930 | 3.1 times |
| 166% | 24 months | $733,122 | 2.0 times a 24-month retainer of $360,000 |
What does the same depth cost on each venue type?
Inventory needed for $25,000 of depth on each side within 2%
What does the calculator assume?
| Part | Method | Assumption |
|---|---|---|
| Retainer | Venues times monthly fee times months | No setup fee; inventory is funded by the project |
| Option value | Black-Scholes call value, averaged across the strikes entered | Zero interest rate; no dividends; equal tranches; European exercise at the end of the term |
| Order book inventory | Twice the depth target per venue | Tokens on the ask and stablecoins on the bid |
| Managed range inventory | 9.8341 times the depth target per pool | A concentrated range of plus or minus 10% around the price |
| Full-range inventory | 200.995 times the depth target per pool | A constant-product pool across all prices |
How should you use the result?
Put both offers on one page
A retainer is a cash cost. A loan is an option cost. Compare them in dollars.
Use a realistic volatility
Bitcoin's volatility understates a new token's. Try 120% to 166%.
Negotiate the strikes
Higher strikes cut the option value. So do tranches released against delivered targets.
Fund depth, not volume
Inventory buys depth. Depth is what a trader feels.
Frequently asked questions
How much does a crypto market maker cost?
A retainer is typically $3,000 to $7,000 a month per exchange according to Arrakis, so about $180,000 a year on three venues at $5,000 each. A token loan needs no cash, but its call options are worth about $275,000 to $550,000 per $1 million loaned over 12 months.
How do you value the call options in a token loan?
With the Black-Scholes formula, using the loan value, the strike prices, the term and the token's volatility. This calculator averages the value across the strikes you enter and assumes a zero interest rate.
Is a token loan cheaper than a retainer?
Only in cash terms. On a $1 million loan at 120% volatility the options are worth about $394,765 over 12 months, more than twice a $180,000 retainer. A loan can still suit a project with plenty of tokens and little cash.
How much inventory does market making need?
About twice the depth target per order book. For $25,000 of depth on each side within 2%, that is $50,000 per exchange. A managed plus or minus 10% DEX range needs about 9.8 times the depth target.
What volatility should I use for a new token?
Higher than for large assets. The median new listing in TDMM's data had annualised volatility of 166% in its first three months. A range of 120% to 166% is a reasonable test.
Is the calculator free to use?
Yes. It is free, needs no sign-up and runs in your browser. No inputs are sent to TDMM.
Related TDMM offerings and guides
Offerings
TDMM publishes this calculator and is itself a market maker. Results are model outputs from the inputs you enter, using the stated assumptions, and are not quotes or offers. Actual terms vary by firm and token. This is not investment, legal or tax advice.