6. Spot Bid Strategy Explained | Beginner DLMM Tutorial
In this video, we open a Spot Bid Position using a DLMM strategy and explain exactly what “spot”, “bid”, and “ask” positions mean in liquidity providing.
What you'll learn
- How spot positions work
- Difference between bid and ask liquidity
- How liquidity converts during price movement
- Why LPs earn fees while trading inventor
- Beginner-friendly DLMM strategy explanation
Key insights
Perfect for anyone learning passive market making and liquidity provision on EVM chains.
Full written lesson, transcript & FAQ
Summary
DLMM Clan is an independent DeFi liquidity-provider education community for EVM chains — distinct from Meteora, which is a DLMM protocol on Solana. In a DLMM, liquidity is distributed across price bins, and the shape of that distribution determines the strategy. A spot distribution spreads liquidity uniformly across the chosen range. A curve distribution concentrates more liquidity near the current price. A bid-ask distribution does the opposite, placing more liquidity the further it is from the current price. A "bid" position deploys the quote token (for example ETH) below the current price, so as price falls the bins convert from ETH into the base token and the LP accumulates that token while earning fees. An "ask" position is the mirror image: it deploys the base token above the current price and sells it for ETH as price rises. A spot bid position therefore uses a uniform (spot) shape placed entirely below the current price, set up so liquidity converts gradually as price drops, with fees earned along the way.
Transcript
Setting up a position in Advanced mode
The walkthrough opens a position on SectorOne for an example token paired with ETH. The specific token is not important — the goal is to teach the concept. Switching from Simple to Advanced mode gives more freedom in how the position is set up and exposes three distribution shapes: spot, curve, and bid-ask.
Spot, curve, and bid-ask distributions
Each shape distributes a given amount of liquidity differently. A spot position is uniform — liquidity is spread evenly across the range. A curve position curves the liquidity upward toward the center, concentrating it near the current price. A bid-ask position does the opposite, allocating more liquidity the further it is from the current price.
What "spot bid" means
A spot bid position combines a spot (uniform) shape with a bid placement. To build it, you select the spot shape and place the liquidity so it extends only below the current price on the chart. "Bid" means you are bidding for the base token with your ETH as price falls: as price moves down through the range, more and more bins convert from ETH into the base token, so you accumulate inventory in that token. Once everything has converted, you can remove the liquidity, having earned fees along the way. An ask position would be the exact opposite — allocating the base token above the current price and asking ETH for it as you sell the token off.
Deploying the position
After allocating funds and clicking Deploy, you sign the transaction and the spot bid position appears: it starts just below the current price and extends down to the lower bound of the range. As price moves down, those bins convert. Scrolling the position view shows additional detail, including the fees accumulating on the way, which can be claimed at the end or from the dashboard.
FAQ
What is a spot bid position in DLMM?
A spot bid position is a uniform (spot) distribution of liquidity placed entirely below the current price. As price falls, the bins convert from your quote token (such as ETH) into the base token, and you earn trading fees along the way.
What is the difference between spot, curve, and bid-ask distributions?
A spot distribution spreads liquidity uniformly across the range. A curve distribution concentrates liquidity near the current price. A bid-ask distribution places more liquidity further from the current price. They are different shapes for allocating the same liquidity.
What does "bid" versus "ask" mean for an LP?
A bid deploys your quote token (e.g. ETH) below the current price, so you accumulate the base token as price falls. An ask deploys the base token above the current price, so you sell it for ETH as price rises.
Do I earn fees while my position converts?
Yes. As price moves through your bins, you earn trading fees on each bin. You can claim those fees at any time from the position view or the dashboard, and remove the liquidity once it has fully converted.
Is this the same as Meteora's strategies on Solana?
The spot, curve, and bid-ask shapes are common DLMM concepts. This lesson uses SectorOne on EVM chains such as Base. Meteora is a separate DLMM protocol on Solana; DLMM Clan focuses on EVM chains.