Why do spreads widen right before an earnings release?
A stock trades on a tight spread all afternoon, then in the final minutes before its scheduled earnings release the spread widens sharply. Seconds after the numbers hit the tape and the price gaps, the spread rapidly re-tightens.
Why? Tie your explanation to the components of the spread.
Show a hint
Spread = adverse selection + inventory risk + processing costs. A known-time, unknown-content event spikes two of them.
Your answer
This one is open-ended. Work it through, then check your reasoning against the full solution.