Arbitrage Trading Strategy
Buys both sides of a market when the combined cost is less than $1.00, locking in a risk-free profit on every pair.
What it is
Arbitrage is the practice of exploiting price inefficiencies between two sides of the same market. On prediction markets, every binary market has a Yes and a No share that should sum to $1.00 at resolution. When temporary imbalances push the combined price below $1.00, arbitrageurs buy both sides and lock in the difference as guaranteed profit once the market settles.
How it works
The core mechanic is simple: if Yes trades at $0.48 and No trades at $0.48, the pair costs $0.96. The arbitrageur buys both and is guaranteed $1.00 at resolution regardless of outcome, netting $0.04 per pair. The edge comes from speed and scale — individual margins are thin, so profitability depends on executing hundreds or thousands of pairs efficiently before the spread closes.
Arbitrageurs typically operate with high frequency and maintain minimal directional exposure. They don't need to predict outcomes — they profit from market structure. The strategy requires sophisticated monitoring of order books across markets to detect windows where the combined bid price drops below the $1.00 parity threshold.
Pair Cost Calculator
Adjust Yes and No prices. When the pair costs less than $1.00, the difference is guaranteed profit.
How it works in practice
Across Polymarket, Kalshi, and Probable Markets, arbitrage opportunities arise when liquidity is fragmented or when sudden news causes asymmetric price moves. A sharp sell-off on Yes shares may not immediately be reflected in No share pricing, creating a brief window where the pair is available below $1.00. Arbitrageurs who can detect and execute on these windows capture the spread.
Polymarket's CLOB (Central Limit Order Book) structure means arbitrageurs compete on execution speed and order placement precision. Most successful arbitrageurs on the platform maintain automated systems that monitor spreads in real time and place paired orders within milliseconds of detecting an opportunity.
Profit at Scale
Individual margins are thin. Profitability depends on executing hundreds or thousands of pairs.
Key Characteristics
The behavioral fingerprints that identify a arbitrageur in on-chain data.
Risks to Consider
Top Arbitrageur Traders
Ranked by risk-adjusted performance score.
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