Even if a cut isn't taken and there aren't other inefficiencies, any money tied up in long-term predictions is earning 0% instead of whatever the current risk-free rate of return is.
If the average no costs less than 73 cents, but the 73% of all polymarkets resolve to No, that would imply that the nothing-ever-happens strategy here is profitable. Are you claiming that it is profitable? Or are one of those premises incorrect?
Edit: conversely, if the average no costs _more_ than 73 cents, but the 73% of all polymarkets resolve to No, that would imply that an everything-always-happens strategy is profitable (neglecting slippage)
From what I've seen and tested, it's been profitable, for the reason you said. Variance and other caveats caused me to not pursue it further. https://news.ycombinator.com/item?id=47754918
The whole premise of prediction markets is that the few people whose perception do match outcomes make bets to push the money-weighted average perception toward outcomes. If perceptions still don't match outcomes at that point, average return is 0 minus transactions, with high variance.
Does the existence of that knowledge make a slight bias lowering the odd on no?
I could fork this and with a 1 line change earn dozens of dollars as long as I don't tell anyone what that secret change is.
No, I think the bias is really just a reflection of how propositions are phrased. We could imagine a mirror-world prediction market that offers all the same propositions, but phrased oppositely: e.g. a market in "person X will die by Y date" becomes a market in "person X will survive until Y date". And in that market, we would see a bias towards propositions resolving as Yes.
That's one event containing three markets, each yes/no. And in a way each market is two separate markets, buy/sell yes and buy/sell no, but they mirror each other.
It must be true that more markets resolve to no than yes because many markets are linked and only have one winner. (ie. if there are 10 people in the race for who will be the next president, 9 will resolve to no)
The contrarian bet is fun but I wonder how it actually holds up. Prediction markets do tend to overprice dramatic outcomes, so "always bet no" isn't as dumb as it sounds. Would love to see real P&L over a few months, not just the thesis.
I've backtested this kind of strategy, and it had a good return (like 100% APR), but then I realized it was cheating by knowing when things are going to resolve. Often times it's not clear. Your return depends a lot on how quickly you can get your money out. I never got around to trying a strat that doesn't know the resolution time, which actually has to be manual cause it takes some judgement to pick things that you expect to resolve soon.
Also requires a lot of volume to be "predictable" obviously, since 1 loss sets you back 10-20 wins. It's surprisingly hard to find reasonable-liquidity markets after all your filtering. Many have huge spreads or thin books. Scare quotes around "predictable" because you never know if others will use this strat or a lot of unlikely events will happen due to insiders.
Another thing, just like the author, I was excluding sports in all the above. Yes Polymarket is famous for letting people bet on world events etc, but turns out it's still more about sports. Betting on the overdog in sports markets seems more appealing because there are plenty of those events with large volume, they're kinda homogenous, you know exactly when they resolve, and they're harder to rig. I simply never got around to putting real time or money into the overdog strat.
I drew the same analogy. You put up $0.95, a YES gambler only puts $0.05 (ignoring spread); you're providing "insurance" in case of a YES. In theory, even if the market prices reflected the true probability of the event happening, the more expensive side should be netting some "insurance premium" on average, right? Not sure, and idk how to observe if that's happening.
Polymarket is also holding onto the money in the meantime. Idk what they do with it, but it's not like some other platforms where they at least work with a bank to earn you some tiny interest on it.
Forgot to add, I wet-ran the non-sports strat once with $100 and lost like $5 net across the month. Not enough diversification like I said, so yeah maybe I'd make $6 the next month. I could only find like 10 things that met all the criteria: ≥90c price, low spread, thick enough ask ($5?), not sports, not related to certain topics that I thought were rigged (eg Mr Beast, Trump saying keywords in speech), likely resolving within a week. Some of them also weirdly took longer to resolve than the title suggested.
It's interesting that this is explicitly for non-sports markets because I see no reason why this would be less applicable there. Sports betters have long talked about that the winning strategy is usually to bet the under (i.e. the no) on most bets. The over (i.e. the yes) is generally a more exciting and fun outcome which causes it to attract more betters which in turns makes that side overpriced.
Like with this bot, I have no idea if that will still lead to actual positive returns. This might just be a remnant from a time when these betting lines were set less intelligently. But all things being equal, it seems logical that "boring" bets would have a better return in the long run than "exciting" bets as long as some betters are at least partially motivated by entertainment.
There's probably a lot of knowledge like this that sports betters have built up over decades that could apply to these new forms of non-sports gambling.
it avoids sports bets because "Who will win game 6 of XYZ" is formatted on the polymarket backend as a Yes/No bet. There's a lot of markets with Yes/No plumbing even though you wouldn't interpret them as such
Fair enough, I assumed the exclusion of sports with a deliberate decision rather than one forced on the project due to the technical details of the platform.
Strategies like this can easily be positive EV until enough people discover it and that actually is the driving force behind efficient pricing.
Here's how the mechanism works: I find that something is statistically worth $0.70 but I am able to buy it for $0.60 and statistically sell it for $0.70 (in the average). I make $0.10 each trade on average. Until you come along, copy my strategy and change $0.60 to $0.61 to frontrun my trades. Then someone else does it for $0.62. Until the market finally reprices to $0.70 where it should be. The guy who tries $0.71 loses money and stops, and then it goes back to $0.70. It's a stable feedback loop.
There are lots of positive EV strategies lying around in these inefficient markets that Citadel hasn't (yet) descended upon. The best advice I can give is if you find one, trade the hell out of it and don't open source it or tell anyone about it, because as soon as more people run it, it will cease to be positive EV and then after that it becomes an infrastructure game.
If it's popular on Github it probably doesn't work.
If you found something that works and is paying your rent, don't put it on Github. My 2 cents.
This all really depends on the efficiency of the market. I think these prediction markets would claim that is their goal, but even Wall Street isn't perfectly efficient. I would also guess that sports betting sites like DraftKings or FanDuel would be even less efficient and less likely to be swayed by a popular GitHub repo. Once again, it goes back to the share of the market that is participating for entertainment purposes. That's a lot more common for sports betting than it is for will the US bomb a certain country.
Yes, you can find positive EV trades on Wall Street as well. I've been diving into this a lot lately, all I can say is it's 10X harder to find strategies that work on Wall Street than prediction markets.
With one exception.
The one easy long-lasting anomaly to exploit on Wall Street which actually does NOT exist on prediction markets: "American stocks go up most of the time". This is actually a massively exploitable structural anomaly (you just buy and hold forever and effectively reap the rewards of a biased coin) and the source of the anomaly is mostly US monetary policy, US foreign policy, and US tech expertise put together. However, it still is an anomaly. The thesis that SPY will continue going up forever is also predicated on these things continuing to work the way they have in the past.
Basically arbitraging human imagination. People love coming up with fantastical concepts because they get attention, but the more exciting a market is, the less likely it is to actually happen. Reality is usually boring.
My general observation is that people tend to underestimate the likelihood of black swan events (covid, financial crisis) even as it's pretty obvious they're happening. And then when they do accept it, they react too far the other way and assume it's never going to end.
I've had success playing the markets in these specific cases. I did fritter away a lot of my gains from the financial crisis thinking I was a genius market timer. But I learned my lesson and didn't waver once I jumped back in after covid.
In both cases I got out before a bulk of the crash and timed the bottom almost to the day. Lucky I know, but I had reasons for both. For the financial crisis it was when Bill Fleckenstein closed his bear fund and put it all in MSFT. For covid it was when it looked like the lockdown was working and NYC hospitals weren't going to completely fall over like Northern Italy or Wuhan.
For any non black-swan scenarios, I assume I'll never get one up on the masters of the universe and just leave everything in blended age-appropriate funds.
I'm very concerned about an AI crash and the future of white collar work in general. But it feels more like a slow death to me than a black swan. So I'm just hedging with bonds and cash and stocks that hopefully don't crash as hard in a recession.
They underestimate the likelihood of black swan because it is very hard for adults to concretely imagine things that have not happened before and then even temporarily fully believe ~"dreams will come true."
One of my go-tos on this is the Fukushima nuclear accident. IIUC there were plenty of folks in Japan who knew of the high risk. Perhaps many interested in nuclear energy outside of Japan, too.
But the average adult if asked about the prospect of a major nuclear incident occurring say, "tomorrow," would narrow their eyes in skepticism. There's almost an instinctual level seeding of doubt.
This can be a good thing. LK-99 was an excellent test of the dissonance from dramatic changes in reality and costs of inaccuracy.
The greatest VCs I have known are exceptional at suspending disbelief to test their ability to basically shape world building.
I would also not want to take even a fair bet against black swan because the day that "S&P500 falls to lowest level since 2016 as Labubus collapse" is the headline is the exact day I least want to lose a big pile of money gambling. If it's the shareholder's money though.... I'm probably getting laid off in that scenario anyways...
This makes sense to me, but isn't there a risk of increasing the potential payoff high enough that someone is motivated to go out and make the yes side happen?
Consider this bot running on us military outcomes or something.
By design it's a game where people with inside knowledge or enough power to bend reality can steal money from people with gambling addiction. Automating your addiction might not be the best move.
This is what markets like Polymarket boil down to. Normies can't win. Some will, of course, but that's just chance and there's no way if ensuring it's you.
It's really no different than a casino: if you ever find yourself with more money than you walked in with, cash out and leave.
Best strategy for most people though is to simply not participate and you'll break even.
Except, the thing is, a decent portion of the population enjoys throwing money away in casinos. If they feel a similar level of enjoyment/entertainment from this type of market, then it's no different and they're playing for a non-financial purpose that your calculus isn't pricing in. Maybe a stretch but theoretically, if they enjoy it enough, it can serve as a much cheaper alternative to a casino and thus could actually have a positive net return to one's personal finances even while losing.
And, I'm not even contemplating gambling addiction. There's a huge market of people that just go to Vegas once or twice a year and come home thousands of dollars poorer. But they don't need it, they may not gamble outside of Vegas, or nothing that would signal an addiction.
You're thinking like an engineer and making the laughable assumption that "prediction markets" are markets. It's totally unregulated with all sorts of grifts and cheats. One of the platforms was promoting a high-return bet against Rory at the Masters yesterday.
You can make money off of all sorts of stuff. You can "sell" the bets, so there's lots of live pump and dump.
We've gone full circle. The bookie with no neck that smelled like onions was more honest than these platforms.
Isn't this just picking up pennies on an active railroad track? You'll win small bets and then get run over once a long tail event completely wipes you out.
What happens if you flood the market with a bunch of implausible bets like "sun won't rise tomorrow"? Sure, you might try to filter that out with some sort of "seasoning" period (ie. don't buy new markets), but then that means more time for arbitrageurs to correctly price the market, depriving you of any price advantage you might have had.
This locks up your money in the meantime, right? If so, considering the fed funds rate is 3.64% (and you can probably get higher rates on stablecoins), a huge chunk of those "winnings" is going to be eaten up by the opportunity cost of the money.
Except that the mere existence of the market with the question posed for people to consider, probably activates the availability heuristic[1], causing people to overestimate the likelihood.
Very confusing. Polymarket doesn't allow US use/users. How are folks in the US participating on Polymarket? (VPNs and the like reportedly don't help either due to KYC policies.)
Polymarket has been live in the US since the beginning of the year. There is a queue but it’s absolutely live. And before that you could still use it so long as you did not use a VPN.
That logic doesn't work because not every bet have even payouts. If there's a market for whether a dice rolls 1 or not, the odds might resolve to "no" 83% of the time, but if it only pays you $1.1 per dollar wagered on "no", you're still losing money.
I think we've collectively DDoSed it. I'm getting a 504 timeout.
The author [page](https://github.com/sterlingcrispin) is there on github, but I can't even find his full list of his repos to confirm it's still there (I also get a 504 on that).
Whether it's pennies in front of a steamroller will depend on the entry price, EV, time left to resolution and many other variables.
Though I agree it's bad math, even if 70% resolve to no, there's a high variance among all of them, and to know whether it's a good bet or not... you have to do your DD on that particular market. Even if you follow the Kelly criterion, randomly choosing bets will probably tank your bankroll sooner or later.
> Whether it's pennies in front of a steamroller will depend on […] many other variables.
No, all these variables cancel out.
If you were picking and choosing, yes. But this approach is basically betting no on all the markets.
The textbook explanation of this is the central limit theorem, proving this mathematically is a bit more involved for power-law systems like this but it’s empirically valid.
If this seems interesting for you remember that if you are putting $100 in a 99 to 1 bet you need to win 100 times to get $100 but only need to loose 1 time to loose $100.
And the chance of losing at least once in a 99% sure bet after 100 rounds is around 60%. Even if you reduce to 30 rounds it still is around 30%.
This may seem smart at first glance, but the math doesn't really checks out.
In your scenario you're assuming the dice rolls are all independent. If polymarket bets were all pure dice rolls the 60% odds you quoted would be true.
But they aren't independent there are a lot of correlations. Global geopolitics for example.
The way the math works out, 73% of markets resolve to No, If you buy No at 0.73 each time you would break even.
No, data situation is bad, at least for market making - you need to scrape the orderbook yourself to be able to do any realistic backtesting. And even then, it's hard to know whether other bids at the same price are ahead of you or behind you in the queue.
"A comprehensive dataset of 1.9 billion trading records from Polymarket, processed into multiple analysis-ready formats. Features cleaned data, unified token perspectives, and user-level transformations — ready for market research, behavioral studies, and quantitative analysis."
Honest question: Why in all hell would you open source this?
I have been making money with a bot off a statistical anomaly in prediction markets lately. There is no way in hell I will open source it or tell you what that anomaly is because I have capacity back-tested it and there are so many players in the market; if all of HN and Github start downloading and use my code it WILL cease to work.
Put another way, your orders are helping move the market and price the market more efficiently; that's the market compensating you for pricing things better. If a thousand people run your strategy, prices will get moved to exactly the point where your strategy stops working. You effectively split that pie with a thousand people.
All strategies get priced in eventually. This is basically the thesis of index funds. It's fine to make money in the interim, but that isn't everyone's goal.
Disclaimer: I contribute work as a political advisor and don't participate in betting markets as a market participant.
Nevertheless, Polymarket is a very interesting marketplace of sentiments and information, and it can be a very strong leading indicator of huge price movements in "real" markets like the NYSE, in part because it directly measures one factor of sentiment, i.e. whatever the prediction is about. Market sentiment determines market prices on very large and deep markets, too.
In the run-up to the election, when Trump was running against Biden, a betting market was a leading predictor of NASDAQ (a very deep, very liquid index of stocks). I wrote up the findings here: https://medium.com/@rviragh/does-the-stock-market-react-posi...
This indicator was the best one anyone has ever shown for NASDAQ for any signal, period. The signal was so strong it trumped all other signals and variances of any kind. Traders trading with just this signal and no other signal of any kind could have made practically an unlimited amount of money as long as the signal was intact. (Basically, until Biden dropped out.)
I myself didn't place any bet due to my role as a political advisor at the time, but the size of the correlation is still the biggest and most surprising one I've ever seen.
https://x.com/sterlingcrispin/status/2043723823678382254
They admit no returns.
But it does seem like a fun project and nowhere does it say anything about returns or profits so not scammy imo just funny meme backed code
Yes exactly.
The bot has zero risk management and I have a strong disclaimer on the github it is essentially a meme.
73% of all polymarkets do resolve to No though.
There's a good dataset on huggingface if you wanted to do some data science
https://huggingface.co/datasets/SII-WANGZJ/Polymarket_data
It doesn't matter if 99% resolve no, if they're priced appropriately betting no on every single one won't make you money.
> 73% of all polymarkets do resolve to No though.
I bet the average price for a no bet across these markets is 73 cents.
> I bet the average price for a no bet across these markets is 73 cents.
Behavioral economics has already answered the question of whether humans are, on average, perfectly rational economic actors. They are not.
To the contrary, there is substantial evidence indicating a meaningful number of humans will mis-estimate the likelihood of uncommon future events.
71 cents*, the bookie gets a cut either way it goes.
Even if a cut isn't taken and there aren't other inefficiencies, any money tied up in long-term predictions is earning 0% instead of whatever the current risk-free rate of return is.
Untrue for polymarket. True for kalshi. No bookie fees on polymarket
It's not. But also a lot of those stats thrown around are misleading.
If the average no costs less than 73 cents, but the 73% of all polymarkets resolve to No, that would imply that the nothing-ever-happens strategy here is profitable. Are you claiming that it is profitable? Or are one of those premises incorrect?
Edit: conversely, if the average no costs _more_ than 73 cents, but the 73% of all polymarkets resolve to No, that would imply that an everything-always-happens strategy is profitable (neglecting slippage)
From what I've seen and tested, it's been profitable, for the reason you said. Variance and other caveats caused me to not pursue it further. https://news.ycombinator.com/item?id=47754918
Are you willing to pay $.27 for that perspective? Sounds like we have a market!
Why would outcomes match perceptions?
The whole premise of gambling is that they don't
The whole premise of prediction markets is that the few people whose perception do match outcomes make bets to push the money-weighted average perception toward outcomes. If perceptions still don't match outcomes at that point, average return is 0 minus transactions, with high variance.
huh? that sounds like ideology and not empirical observation.
Does the existence of that knowledge make a slight bias lowering the odd on no? I could fork this and with a 1 line change earn dozens of dollars as long as I don't tell anyone what that secret change is.
No, I think the bias is really just a reflection of how propositions are phrased. We could imagine a mirror-world prediction market that offers all the same propositions, but phrased oppositely: e.g. a market in "person X will die by Y date" becomes a market in "person X will survive until Y date". And in that market, we would see a bias towards propositions resolving as Yes.
> 73% of all polymarkets do resolve to No though.
I wonder what it means exactly. Typical Polymarket looks like this:
X happens before May. [Yes][No]
X happens before June. [Yes][No]
X happens before July. [Yes][No]
...
So even if X ended up happens in December, it's still 12.5% Yes and 87.5% No?
That's one event containing three markets, each yes/no. And in a way each market is two separate markets, buy/sell yes and buy/sell no, but they mirror each other.
I understand that. That's not my question tho. I am asking for the exact meaning of the 73% number.
And how do you report it in May?
its funny, tells you it barely works, and its a good meme.
Successful project imo.
In addition, it serves as a good template for writing your own polymarket bot with whatever logic you want.
When people do find an edge they tend not to share it ;)
It must be true that more markets resolve to no than yes because many markets are linked and only have one winner. (ie. if there are 10 people in the race for who will be the next president, 9 will resolve to no)
"just funny meme backed code"
I laughed. That's inspired. Quite the nerd-snipe as well, based on the rapidly accumulating threads on effectiveness, probabilities and markets.
The contrarian bet is fun but I wonder how it actually holds up. Prediction markets do tend to overprice dramatic outcomes, so "always bet no" isn't as dumb as it sounds. Would love to see real P&L over a few months, not just the thesis.
I've backtested this kind of strategy, and it had a good return (like 100% APR), but then I realized it was cheating by knowing when things are going to resolve. Often times it's not clear. Your return depends a lot on how quickly you can get your money out. I never got around to trying a strat that doesn't know the resolution time, which actually has to be manual cause it takes some judgement to pick things that you expect to resolve soon.
Also requires a lot of volume to be "predictable" obviously, since 1 loss sets you back 10-20 wins. It's surprisingly hard to find reasonable-liquidity markets after all your filtering. Many have huge spreads or thin books. Scare quotes around "predictable" because you never know if others will use this strat or a lot of unlikely events will happen due to insiders.
Another thing, just like the author, I was excluding sports in all the above. Yes Polymarket is famous for letting people bet on world events etc, but turns out it's still more about sports. Betting on the overdog in sports markets seems more appealing because there are plenty of those events with large volume, they're kinda homogenous, you know exactly when they resolve, and they're harder to rig. I simply never got around to putting real time or money into the overdog strat.
> One loss sets you back 10-20 wins.
didn't look at the numbers, but this one sentence reminds me of selling options for 'passive income' (don't do that)
I drew the same analogy. You put up $0.95, a YES gambler only puts $0.05 (ignoring spread); you're providing "insurance" in case of a YES. In theory, even if the market prices reflected the true probability of the event happening, the more expensive side should be netting some "insurance premium" on average, right? Not sure, and idk how to observe if that's happening.
Polymarket is also holding onto the money in the meantime. Idk what they do with it, but it's not like some other platforms where they at least work with a bank to earn you some tiny interest on it.
Quintessential hustler logic: inability to compare the gains from wins to inevitable losses.
Forgot to add, I wet-ran the non-sports strat once with $100 and lost like $5 net across the month. Not enough diversification like I said, so yeah maybe I'd make $6 the next month. I could only find like 10 things that met all the criteria: ≥90c price, low spread, thick enough ask ($5?), not sports, not related to certain topics that I thought were rigged (eg Mr Beast, Trump saying keywords in speech), likely resolving within a week. Some of them also weirdly took longer to resolve than the title suggested.
It's interesting that this is explicitly for non-sports markets because I see no reason why this would be less applicable there. Sports betters have long talked about that the winning strategy is usually to bet the under (i.e. the no) on most bets. The over (i.e. the yes) is generally a more exciting and fun outcome which causes it to attract more betters which in turns makes that side overpriced.
Like with this bot, I have no idea if that will still lead to actual positive returns. This might just be a remnant from a time when these betting lines were set less intelligently. But all things being equal, it seems logical that "boring" bets would have a better return in the long run than "exciting" bets as long as some betters are at least partially motivated by entertainment.
There's probably a lot of knowledge like this that sports betters have built up over decades that could apply to these new forms of non-sports gambling.
it avoids sports bets because "Who will win game 6 of XYZ" is formatted on the polymarket backend as a Yes/No bet. There's a lot of markets with Yes/No plumbing even though you wouldn't interpret them as such
Fair enough, I assumed the exclusion of sports with a deliberate decision rather than one forced on the project due to the technical details of the platform.
Strategies like this can easily be positive EV until enough people discover it and that actually is the driving force behind efficient pricing.
Here's how the mechanism works: I find that something is statistically worth $0.70 but I am able to buy it for $0.60 and statistically sell it for $0.70 (in the average). I make $0.10 each trade on average. Until you come along, copy my strategy and change $0.60 to $0.61 to frontrun my trades. Then someone else does it for $0.62. Until the market finally reprices to $0.70 where it should be. The guy who tries $0.71 loses money and stops, and then it goes back to $0.70. It's a stable feedback loop.
There are lots of positive EV strategies lying around in these inefficient markets that Citadel hasn't (yet) descended upon. The best advice I can give is if you find one, trade the hell out of it and don't open source it or tell anyone about it, because as soon as more people run it, it will cease to be positive EV and then after that it becomes an infrastructure game.
If it's popular on Github it probably doesn't work.
If you found something that works and is paying your rent, don't put it on Github. My 2 cents.
This all really depends on the efficiency of the market. I think these prediction markets would claim that is their goal, but even Wall Street isn't perfectly efficient. I would also guess that sports betting sites like DraftKings or FanDuel would be even less efficient and less likely to be swayed by a popular GitHub repo. Once again, it goes back to the share of the market that is participating for entertainment purposes. That's a lot more common for sports betting than it is for will the US bomb a certain country.
> but even Wall Street isn't perfectly efficient.
Yes, you can find positive EV trades on Wall Street as well. I've been diving into this a lot lately, all I can say is it's 10X harder to find strategies that work on Wall Street than prediction markets.
With one exception.
The one easy long-lasting anomaly to exploit on Wall Street which actually does NOT exist on prediction markets: "American stocks go up most of the time". This is actually a massively exploitable structural anomaly (you just buy and hold forever and effectively reap the rewards of a biased coin) and the source of the anomaly is mostly US monetary policy, US foreign policy, and US tech expertise put together. However, it still is an anomaly. The thesis that SPY will continue going up forever is also predicated on these things continuing to work the way they have in the past.
Basically arbitraging human imagination. People love coming up with fantastical concepts because they get attention, but the more exciting a market is, the less likely it is to actually happen. Reality is usually boring.
The problem with that thesis is that this doesn't seem to actually work as a strategy
My general observation is that people tend to underestimate the likelihood of black swan events (covid, financial crisis) even as it's pretty obvious they're happening. And then when they do accept it, they react too far the other way and assume it's never going to end.
I've had success playing the markets in these specific cases. I did fritter away a lot of my gains from the financial crisis thinking I was a genius market timer. But I learned my lesson and didn't waver once I jumped back in after covid.
In both cases I got out before a bulk of the crash and timed the bottom almost to the day. Lucky I know, but I had reasons for both. For the financial crisis it was when Bill Fleckenstein closed his bear fund and put it all in MSFT. For covid it was when it looked like the lockdown was working and NYC hospitals weren't going to completely fall over like Northern Italy or Wuhan.
For any non black-swan scenarios, I assume I'll never get one up on the masters of the universe and just leave everything in blended age-appropriate funds.
I'm very concerned about an AI crash and the future of white collar work in general. But it feels more like a slow death to me than a black swan. So I'm just hedging with bonds and cash and stocks that hopefully don't crash as hard in a recession.
They underestimate the likelihood of black swan because it is very hard for adults to concretely imagine things that have not happened before and then even temporarily fully believe ~"dreams will come true."
One of my go-tos on this is the Fukushima nuclear accident. IIUC there were plenty of folks in Japan who knew of the high risk. Perhaps many interested in nuclear energy outside of Japan, too.
But the average adult if asked about the prospect of a major nuclear incident occurring say, "tomorrow," would narrow their eyes in skepticism. There's almost an instinctual level seeding of doubt.
This can be a good thing. LK-99 was an excellent test of the dissonance from dramatic changes in reality and costs of inaccuracy.
The greatest VCs I have known are exceptional at suspending disbelief to test their ability to basically shape world building.
I would also not want to take even a fair bet against black swan because the day that "S&P500 falls to lowest level since 2016 as Labubus collapse" is the headline is the exact day I least want to lose a big pile of money gambling. If it's the shareholder's money though.... I'm probably getting laid off in that scenario anyways...
I make similar bets. The SAAS "apocalypse" looks like a buying opportunity to me.
This makes sense to me, but isn't there a risk of increasing the potential payoff high enough that someone is motivated to go out and make the yes side happen?
Consider this bot running on us military outcomes or something.
By design it's a game where people with inside knowledge or enough power to bend reality can steal money from people with gambling addiction. Automating your addiction might not be the best move.
This is what markets like Polymarket boil down to. Normies can't win. Some will, of course, but that's just chance and there's no way if ensuring it's you.
It's really no different than a casino: if you ever find yourself with more money than you walked in with, cash out and leave.
Best strategy for most people though is to simply not participate and you'll break even.
You say that like it's bad thing, but really it's great!
It gives us normies a way to see what the powerful are thinking.
normies that don't enter the game, because the ones that do just loose their money
Except, the thing is, a decent portion of the population enjoys throwing money away in casinos. If they feel a similar level of enjoyment/entertainment from this type of market, then it's no different and they're playing for a non-financial purpose that your calculus isn't pricing in. Maybe a stretch but theoretically, if they enjoy it enough, it can serve as a much cheaper alternative to a casino and thus could actually have a positive net return to one's personal finances even while losing.
And, I'm not even contemplating gambling addiction. There's a huge market of people that just go to Vegas once or twice a year and come home thousands of dollars poorer. But they don't need it, they may not gamble outside of Vegas, or nothing that would signal an addiction.
how can it be cheaper? people will spend the same amount or even more considering that is more easy to spend more since it's digital
> If they feel a similar level of enjoyment/entertainment from this type of market, then it's no different
If Polymarket were regulated like a casino, I’d actually have no problem with it.
You're thinking like an engineer and making the laughable assumption that "prediction markets" are markets. It's totally unregulated with all sorts of grifts and cheats. One of the platforms was promoting a high-return bet against Rory at the Masters yesterday.
You can make money off of all sorts of stuff. You can "sell" the bets, so there's lots of live pump and dump.
We've gone full circle. The bookie with no neck that smelled like onions was more honest than these platforms.
Wouldn't a high-return bet against Rory make sense? He was very likely to win.
Well, that's why things aren't priced uniformly, isn't it?
Isn't this just picking up pennies on an active railroad track? You'll win small bets and then get run over once a long tail event completely wipes you out.
I don't think the author is trying to pretend this is some sophisticated strategy you should actually use (note the chudjak in the image on github)
If you bet it all on one event yes, otherwise long tail just loses your bet. Downside risk is limited to your bet.
Related: https://www.jbecker.dev/research/prediction-market-microstru... (previous discussion: https://news.ycombinator.com/item?id=46680515)
Basically, realized vol is lower than implied vol over time. Yes.
also people overpay for skew protection and you can make consistent money selling skews (until that one time it blows up on you)
Already priced in.
The author also noted:
> yes this has to buy below 0.73 long term, the bot has a configurable ceiling set at 0.65 and checks for new markets buying closer to .5
https://x.com/sterlingcrispin/status/2043685362812461436
For this question I'm working on https://polygains.com
What other question would you like to be backtested? This one is fairly easy
For every bucket of probability, what is the chance it resolves correctly?
For example, for markets that are between 60 and 70, is it the case that around 65% of them resolve to yes?
I guess you want to take a certain time before out finishes, so focus on sports.
What happens if you flood the market with a bunch of implausible bets like "sun won't rise tomorrow"? Sure, you might try to filter that out with some sort of "seasoning" period (ie. don't buy new markets), but then that means more time for arbitrageurs to correctly price the market, depriving you of any price advantage you might have had.
There are quite a few of those, my favourite: https://polymarket.com/event/will-jesus-christ-return-before...
If you put all your money on no, you get 4% if you win, and if Jesus comes back and you lose, money won't matter.
>you get 4% if you win,
This locks up your money in the meantime, right? If so, considering the fed funds rate is 3.64% (and you can probably get higher rates on stablecoins), a huge chunk of those "winnings" is going to be eaten up by the opportunity cost of the money.
jane street is always hiring!
> What happens if you flood the market with a bunch of implausible bets like "sun won't rise tomorrow"?
Who does "you" refer to in this sentence? Polymarket itself?
I'm pretty sure if Polymarket itself decides it wants to screw you, you're gonna lose no natter what your strategy is.
That presumes that there are people selling into new markets at 0.5 without thinking about the actual odds.
Except that the mere existence of the market with the question posed for people to consider, probably activates the availability heuristic[1], causing people to overestimate the likelihood.
[1] https://philopedia.org/topics/availability-heuristic/
"Nothing ever happens"
Benjamin, huh?
Someone has (had?) a bot on Manifold that does the same thing, and it is profitable: https://manifold.markets/dcxStep
(Manifold doesn't use real money, so there's more "free money" lying around waiting to be picked up than on most real-money markets)
Someone needs to make a market on whether or not this is profitable
Very confusing. Polymarket doesn't allow US use/users. How are folks in the US participating on Polymarket? (VPNs and the like reportedly don't help either due to KYC policies.)
Polymarket has been live in the US since the beginning of the year. There is a queue but it’s absolutely live. And before that you could still use it so long as you did not use a VPN.
Cryptocurrency. Even if it is a traceable crypto like usdt, it doesn't seem to be enforced.
> Polymarket doesn't allow US use/users. How are folks in the US participating on Polymarket?
Same way Binance did [1]. Assuming they wouldn’t get charged.
[1] https://www.binance.com/en/square/post/362592428897
Idk if there is new KYC I dont know about, but you just needed a VPN.
any stats on your returns so far?
Turkey reported high winrate until Thanksgiving
Falling victim to the classic fallacy. So sad
We call it a "black turkey event", nobody saw it coming.
Not my project, but author said on X:
> Why predict the future when 73.4% of all Polymarkets resolve as No?
https://x.com/sterlingcrispin/status/2043398710013595857
That logic doesn't work because not every bet have even payouts. If there's a market for whether a dice rolls 1 or not, the odds might resolve to "no" 83% of the time, but if it only pays you $1.1 per dollar wagered on "no", you're still losing money.
I think we've collectively DDoSed it. I'm getting a 504 timeout.
The author [page](https://github.com/sterlingcrispin) is there on github, but I can't even find his full list of his repos to confirm it's still there (I also get a 504 on that).
Back up
GitHub is down yet again. Guess they forgot to tell their AI “make no mistakes” while vibecoding.
I was about to say “first Microsoft service to reach zero 9s of uptime”, but then I realized, it’s Microsoft… GitHub is definitely not the first
Polymarket already has "Nothing Ever Happens" markets where you can bet on a set of events all not happening together. Because why not.
"Nothing ever happens" ETF
Very cool. The opposite of the black swan or turkey corollary. Every day the turkey gets fed and is happy until Thanksgiving rolls around.
> Heroku Workflow The shell helpers use either an explicit app name argument or HEROKU_APP_NAME.
nice to see heroku still alive...
I love heroku, death to vercel
Don’t be gullible enough to fall for this bad math.
Say 70% of the time it resolves to ‘no’, you still don’t make money by blindly choosing ‘no’.
Guess why?
Hint: This strategy is also described with the macabre analogy: picking up pennies in front of a steamroller.
Do you want to pick up pennies in front of a steamroller?
Fall for it? I think it's pretty clear the author is not trying to convince any one of anything. It's mostly a joke.
Whether it's pennies in front of a steamroller will depend on the entry price, EV, time left to resolution and many other variables.
Though I agree it's bad math, even if 70% resolve to no, there's a high variance among all of them, and to know whether it's a good bet or not... you have to do your DD on that particular market. Even if you follow the Kelly criterion, randomly choosing bets will probably tank your bankroll sooner or later.
> Whether it's pennies in front of a steamroller will depend on […] many other variables.
No, all these variables cancel out.
If you were picking and choosing, yes. But this approach is basically betting no on all the markets.
The textbook explanation of this is the central limit theorem, proving this mathematically is a bit more involved for power-law systems like this but it’s empirically valid.
If this seems interesting for you remember that if you are putting $100 in a 99 to 1 bet you need to win 100 times to get $100 but only need to loose 1 time to loose $100.
And the chance of losing at least once in a 99% sure bet after 100 rounds is around 60%. Even if you reduce to 30 rounds it still is around 30%.
This may seem smart at first glance, but the math doesn't really checks out.
In your scenario you're assuming the dice rolls are all independent. If polymarket bets were all pure dice rolls the 60% odds you quoted would be true.
But they aren't independent there are a lot of correlations. Global geopolitics for example.
The way the math works out, 73% of markets resolve to No, If you buy No at 0.73 each time you would break even.
Not financial advice of course
Betteridge's Bet
What's the data situation like if you wanted to backtest a model like this? Is it easily accessible?
No, data situation is bad, at least for market making - you need to scrape the orderbook yourself to be able to do any realistic backtesting. And even then, it's hard to know whether other bids at the same price are ahead of you or behind you in the queue.
this is a good dataset
https://huggingface.co/datasets/SII-WANGZJ/Polymarket_data
"A comprehensive dataset of 1.9 billion trading records from Polymarket, processed into multiple analysis-ready formats. Features cleaned data, unified token perspectives, and user-level transformations — ready for market research, behavioral studies, and quantitative analysis."
null hypothesis bot
Too bad we can't run this bot in the nineties. There seems to be quite a bit happening these days.
The stopped clock is right twice a day, but it reads noon and we're at half past three
Honest question: Why in all hell would you open source this?
I have been making money with a bot off a statistical anomaly in prediction markets lately. There is no way in hell I will open source it or tell you what that anomaly is because I have capacity back-tested it and there are so many players in the market; if all of HN and Github start downloading and use my code it WILL cease to work.
Put another way, your orders are helping move the market and price the market more efficiently; that's the market compensating you for pricing things better. If a thousand people run your strategy, prices will get moved to exactly the point where your strategy stops working. You effectively split that pie with a thousand people.
Well, it's not making money, for one.
Because they are doing it for fun?
All strategies get priced in eventually. This is basically the thesis of index funds. It's fine to make money in the interim, but that isn't everyone's goal.
for the lulz obviously
you wouldn't get it
Disclaimer: I contribute work as a political advisor and don't participate in betting markets as a market participant.
Nevertheless, Polymarket is a very interesting marketplace of sentiments and information, and it can be a very strong leading indicator of huge price movements in "real" markets like the NYSE, in part because it directly measures one factor of sentiment, i.e. whatever the prediction is about. Market sentiment determines market prices on very large and deep markets, too.
In the run-up to the election, when Trump was running against Biden, a betting market was a leading predictor of NASDAQ (a very deep, very liquid index of stocks). I wrote up the findings here: https://medium.com/@rviragh/does-the-stock-market-react-posi...
This indicator was the best one anyone has ever shown for NASDAQ for any signal, period. The signal was so strong it trumped all other signals and variances of any kind. Traders trading with just this signal and no other signal of any kind could have made practically an unlimited amount of money as long as the signal was intact. (Basically, until Biden dropped out.)
I myself didn't place any bet due to my role as a political advisor at the time, but the size of the correlation is still the biggest and most surprising one I've ever seen.
I saw the Twitter meme and knew instantly he was going to be a good follow. Was not disappointed!