Author: Changan I Biteye Content Team
In the prediction market, the essence of the game is not the truth, but the pricing deviation.
For professional traders, Polymarket is more like an alternative financial hunting ground composed of probabilities, odds, liquidity, and information asymmetry.
Some bet based on intuition, others follow trends based on emotions; while the players who truly make money in the long run extract risk-free or high-probability profits from these pricing imbalances through systematic strategies.
In this article, Biteye systematically breaks down for you:
The most mainstream and genuinely existing arbitrage logic in the prediction market
Multiple real arbitrage cases to see how experts actually make money
Whether ordinary players still have opportunities in a highly competitive environment
I. Five Major Schools of Arbitrage: From Mathematics to Manipulation, Which One Do You Belong To?
1️⃣ "Picking Up Money" Arbitrage Within the Platform: When YES + NO = 1
Principle: Utilize the mathematical property that binary options must settle at 1, monitoring the moments when the total price of YES and NO is below 1, while simultaneously buying positions on both sides. You will profit from the price difference upon settlement.
Example: At the moment when the total is 0.97, buy positions on both sides. Regardless of the outcome, holding until settlement will guarantee a $1 payout, with the 0.03 price difference being the profit.
⚠️ Small tips: Currently extremely competitive, dominated by high-frequency bots, making it difficult for retail investors to find opportunities.
2️⃣ Cross-Platform Arbitrage: Rule Differences Are Opportunities
Principle: Capture price differences for the same event between different prediction platforms (e.g., Polymarket, Kalshi, Opinion Labs, Limitless, etc.), buy low and sell high to lock in profits.
Example: If an event's Yes price on Polymarket is 45¢, and the corresponding No price on Kalshi is 52¢ → lock in the price difference.
⚠️ Small tips: Different rules/oracles on both platforms may lead to different settlement results.
3️⃣ Information "Front-Running" Arbitrage: Just a Few Seconds Faster Than the Market Is Enough
Principle: Utilize off-chain data (such as live sports broadcasts, real-time vote counting) that is faster than the on-chain order book update time to place lightning-fast orders.
This likely originated from traditional hedge funds, which would capture live streams of Federal Reserve speeches during meetings. If the frequency of dovish keywords (like neutral, easing, moderation) exceeds expectations, the algorithm would clear all sell orders for Treasury futures or the S&P 500 index within 10 milliseconds.
⚠️ Small tips: This is also common in prediction markets for sports events, where on-site spectators or dedicated high-speed live streams are often 5-10 seconds faster than TV broadcasts.
4️⃣ Negative Risk Arbitrage: Hedging Principal with Probability Distribution
Principle: In markets involving multiple mutually exclusive options (like elections or multi-party events), hedge the principal risk by simultaneously placing multiple NO positions, utilizing the overall pricing deviation of probabilities for each option.
⚠️ Small tips: Essentially, this uses mathematical probability distributions to ensure a certain profit when most outcomes occur, and even in the worst-case scenario, it can maintain a break-even point or incur only minimal losses.
5️⃣ Market Price Spread Making Arbitrage: Low Liquidity = More Opportunities
Principle: In newly launched or low liquidity markets on Polymarket, earn intermediate profits by placing buy and sell orders at price spreads.
Example: In a market where the buy price is 0.3 and the sell price is 0.7, with a difference of 0.4. You can buy at 0.31 and place a sell order at 0.69, capturing the profit from the price spread.
⚠️ Small tips: Pay attention to market order book data, but be wary of market sentiment/news causing one-sided trends, and choose familiar sectors for operations.
II. Real Case Review: How Top Traders Made Millions on Polymarket?
1️⃣ Statistical Arbitrage on the Number of Musk's Posts
There are many continuous markets in the prediction market with ample historical data for backtesting.
For example, the prediction market for the number of posts by Musk: Traders conduct quantitative analysis on Musk's historical posting data to identify deterministic patterns:
The number of posts on weekdays is 20 more than on weekends
Winter activity is 3.1 times that of summer
February is the most active month of the year.
After analyzing possible variable factors, traders can buy when the probability significantly exceeds the range. Additionally, there are many similar markets in the prediction market. Studying the home and away performance of NBA teams, average points scored, and losses, and calculating this data using mathematical models for betting.
2️⃣ Violent Manipulation Arbitrage in the 15-Minute Market (Total Profit: 280K)
PM trader a4385 exploited the vulnerability of Polymarket's short-term prediction market during low liquidity periods, manipulating spot prices with small costs to reverse harvest the opposing side of the prediction market.
During weekends, the market depth of tokens is shallow, so a small amount of capital can cause price fluctuations.
He bought "up" on PM's XRP 15Min price prediction, even disregarding odds to forcefully sweep the market. Just before the 15 Min prediction window was about to settle, he instantly raised the XRP spot price with $1 million on Binance, causing the XRP 15 Min K-line to close up.
Currently, a4385's total profit on Polymarket is 280K, with an average cost of around $6,000 for each price manipulation.
If you pay close attention, you might occasionally notice that the correlation between XRP's price and probability during weekend periods decreases. The 15 Min line closes down, but the probability is at 0.5, indicating that funds are being manipulated again.
This is an extreme case of exploiting structural vulnerabilities in the prediction market.
3️⃣ Automated Arbitrage of Volatility + Probability (Total Profit: 448K)
PM trader distinct-baguette focuses on binary markets for cryptocurrency prices (settling at $1 for Yes/No), achieving a profit of $448K through 26,756 trades.
The core of his strategy lies in constructing an automated model using volatility + probability arbitrage.
He waits for moments of repricing during volatility or panic, buying both sides when the combined probabilities of "Yes" and "No" are below 1.
By employing stable position management and executing high-frequency repeat operations, he converts small pricing deviations into scaled profits, averaging $17 profit per trade.
4️⃣ News-Driven Subjective Trading (Total Profit: 850K)
Car
is among the top 0.01% of traders on Polymarket, with a historical profit of $850K.
His operations differ from the aforementioned arbitrage, as he engages in news trading across different hot sectors like politics and macroeconomics.
When major news breaks, he quickly analyzes the event's impact on related markets and decisively builds positions in the direction of the trend.
When market sentiment slows and consolidates, he immediately takes profits, never waiting for the settlement phase.
Example: GTA 6 (Grand Theft Auto 6) is a game developed by American company Rockstar Games. It is regarded as one of the most anticipated games globally, and any news regarding its development progress or release date generates significant attention from players and the market. When news of a fire at the office just broke, the Yes price on Polymarket for "Will GTA 6 be released before 2025?" was still low. The market had not fully accounted for the impact on GTA 6's development progress, and Car seized this information window to buy "No" or sell "Yes." As the fire news went viral on social media, many followed suit and bought "No." When the news hype peaked and the price reflected the fire's expectations, Car would immediately take profits and close positions.
This operation method, based on sudden news, betting only on probability corrections, and not waiting for settlement, is the closest to professional trader thinking in the prediction market.
5️⃣ Reversal Trading: Betting on Market "Overconfidence" (Total Profit: 6K)
There is always a possibility of reversal in the prediction market, and a group of traders specializes in betting on the likelihood of reversals. According to Dune's data: The accuracy rate 4 hours before settlement on Polymarket is 95.4%, 12 hours before is 89.4%, and 1 day before is 88.2%. Therefore, this group of traders specifically targets such markets to buy the possibility of reversals, usually buying at prices not exceeding 10¢, which is a typical low-probability high-odds strategy.
III. Three Suggestions from Biteye for Ordinary Players
Polymarket's monthly trading volume continues to hit new highs, with profit cases emerging constantly, indicating that this market is gradually maturing. Although arbitrage opportunities are being compressed, the increase in market depth and breadth has also spawned more new opportunities that rely on cognition and strategy.
Here are three suggestions from Biteye for everyone:
1️⃣ Stay Away from the Battlefield of Bots
Due to the mainstreaming of Polymarket, simple Yes + No = 1 arbitrage has become a game between bots.
2️⃣ Learn to Copy Homework
Monitor the dynamics of top wallets and new wallets (which may be wash trading) using on-chain analysis tools, combined with research on news/events to place bets, engaging in subjective trading based on pricing deviations.
3️⃣ Dynamic Profit Taking, Never Be Greedy
The odds in the prediction market are dynamic; once your judgment is reflected by the market, the advantage has already been realized. Taking profits early can significantly improve capital turnover for later retail investors and avoid disputes during final settlement.
In Conclusion: Cognitive Bias Is Your Arbitrage Space
The prediction market is transitioning from niche to mainstream, and the profit model is evolving from simple arbitrage to cognition-driven strategies. Understanding the rules, mastering information, and maintaining discipline will give you the opportunity to become a long-term winner in the game of probabilities.
The prediction market does not bet on the truth, but on cognitive biases. Are you ready?
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