Arbitrage
Arbitrage Opportunities
How to find and exploit price discrepancies in prediction markets.
Prediction markets are inefficient compared to traditional finance. This creates opportunities for Arbitrage—profit without risk.
Type 1: Cross-Platform Arbitrage
Comparing odds between Polymarket, Kalshi, PredictIt, or Sportsbooks.
- Scenario:
- Polymarket has "Trump Wins" at 55¢ (55%).
- PredictIt has "Trump Wins" at 60¢ (60%).
- The Play: You can buy "Yes" on Polymarket and bet "No" (or sell "Yes") on the other platform to lock in the spread.
Type 2: Negative Risk (Sum > 100%)
Sometimes, in a market with multiple outcomes (e.g., "Who will be the VP nominee?"), the prices of all candidates might sum up to $1.05 (105%).
- This means the market is overpriced.
- The Play: You sell "NO" on every single candidate. Since only one can win, you pocket the extra $0.05 risk-free.
Type 3: Poll Arbitrage
Using real-world data to front-run the market.
- Scenario: A market resolves based on "FiveThirtyEight Polling Average".
- The Play: You monitor the individual polls that feed into the average. When a new poll drops, you calculate the new average before the website updates. You trade on Polymarket before the crowd reacts.