This market-making question comes from a prop trading final round which I failed.
I was told to make a market on the number of prime numbers between 1-100. I was confident the number was around 20-30. (It's 25). So I made my market at 20-25. (Interviewer only allowed a spread of 5). They proceeded to buy my sell offer at 25. Then I moved from 30-35. They bought it again. I moved from 35-40. They kept buying until it was 65-70, then sold at 65.
They then stated they have profited off me and I have in fact lost money as they bought for 25,35,etc.
I'm having trouble wrapping my head around the correct way to approach this game. Am I not supposed to raise my quote when they buy? I thought I was winning out if he was buying for 50, when I knew the fair price was around 25.
Any help or direction to resources is greatly appreciated!