Deconstructing Polymarket's Five Arbitrage Strategies: How Can Ordinary Players Seize a Million-Dollar Opportunity?

Author: Changan | Biteye Content Team

In prediction markets, the essence of the game is not the truth, but pricing bias.

For professional traders, Polymarket is more like an alternative financial hunting ground composed of probability, odds, liquidity, and information asymmetry .

Some people bet based on intuition, while others follow the crowd based on emotions; but the players who truly make money in the long run use systematic strategies to extract risk-free or high-probability profits from these pricing imbalances.

This article from Biteye provides a system breakdown:

• Predicting the most mainstream and real arbitrage logic in the market.

• Multiple real-world arbitrage cases: see how the experts make money.

• In a highly competitive environment, is there still a chance for ordinary players?

I. Five major schools of arbitrage: From mathematics to manipulation, which one do you belong to?

1️⃣ "Money-making" arbitrage within the platform: When YES + NO < 1

Principle: Utilizing the mathematical property that binary options always settle to 1, monitor the moment when the sum of the YES and NO prices falls below 1, and simultaneously buy positions on both sides. Profit from the price difference is guaranteed at settlement.

Example: At the moment the total is 0.97, buy both positions simultaneously. Regardless of the outcome, holding until settlement will guarantee a $1 payout, with the 0.03 difference being the profit.

⚠️Small tip: The market is currently extremely competitive and has been monopolized by high-frequency trading bots, making it difficult for individual investors to gain an opportunity.

2️⃣ Cross-platform arbitrage: Differences in rules present opportunities

Principle: Capture price differences for the same event across different prediction platforms (such as Polymarket, Kalshi, Opinion Labs, Limitless, etc.), buy low and sell high, and lock in profits.

Example: On Polymarket, a "Yes" price for a certain event is 45¢, while on Kalshi, the equivalent "No" price is 52¢ → Lock in the price difference.

⚠️Tip : The rules/oracles of the two platforms are different, which may lead to different settlement results.

3️⃣ Information "preemption" arbitrage: Being a few seconds ahead of the market is enough.

Principle: Utilize the time difference between off-chain data (such as live sports broadcasts and real-time ticket counting) and on-chain order book updates to place orders in a flash.

This likely originated from hedge funds in the traditional industry, where algorithms capture live streams of Federal Reserve speeches during meetings. If Dovish keywords (such as neutral, easing, moderation ) appear more frequently than expected in the text, the algorithm will clear out all sell orders for Treasury futures or the S&P 500 index within 10 milliseconds.

⚠️Tip : This is also common in sports prediction markets. Live streams from stadium audiences or dedicated high-speed streams are often 5-10 seconds faster than live TV broadcasts.

4️⃣Negative Risk Arbitrage: Using probability distribution to hedge principal

Principle: In markets involving multiple mutually exclusive options (such as elections or multi-party events), by simultaneously deploying multiple NO positions, the risk to principal is hedged by taking advantage of the sum of the market’s probabilistic pricing of each option.

⚠️Tips : Essentially, it uses mathematical probability distribution to ensure a certain profit in most cases, while maintaining a break-even point or incurring only a minimal loss even in the worst-case scenario.

5️⃣ Market Making Arbitrage Based on Price Spreads: Low Liquidity = More Opportunities

Principle: In newly launched or illiquid markets on Polymarket, place orders to profit from the bid-ask spread.

Example: In a certain market, the best bid price is 0.3 and the best ask price is 0.7, with a difference of 0.4. You can buy at the lower price of 0.31 and place a sell order at 0.69 to profit from the price difference.

⚠️Tips : You can pay attention to market data, but be wary of market sentiment/news causing orders to be affected by one-way market movements. You should choose to operate in sectors you are familiar with.

II. Real-world case study: How did top traders earn millions of dollars on the polymarket?

1️⃣ Arbitrage based on the "statistics" of Musk's post count

There are many markets with continuity and a large amount of historical data available for backtesting in the prediction market.

For example, Musk's post count can be used to predict the market: traders use quantitative analysis of Musk's historical post data to identify deterministic patterns.

• The number of posts on weekdays is 20 more than the number of posts on weekends.

• Winter activity levels are 3.1 times higher than summer activity levels.

• February is the most active period of the year.

After analyzing potential variable factors, one can buy when the probability significantly exceeds the expected range. Besides this, there are many similar markets in prediction markets. For example, studying NBA teams' home and away performance, average goals scored, and number of losses, using mathematical models to calculate bets based on this data.

2️⃣ 15-minute market manipulation arbitrage (total profit 280K)

PM trader a4385 exploited the vulnerability of Polymarket's short-term prediction market during periods of low liquidity, manipulating spot prices at a low cost to profit against counterparties in the prediction market.

The market depth for tokens is shallower on weekends, so even a small amount of capital can cause price fluctuations.

He bought "up" on PM's 15-minute XRP price prediction, even aggressively buying regardless of the odds. Just as the 15-minute prediction window was about to close, he used $1 million to instantly drive up the XRP spot price on Binance, causing the 15-minute candlestick chart to close higher.

Currently, a4385's total profit on Polymarket is 280K, with an average pull-in wear of around 6000 USD.

If you pay close attention, you might occasionally notice that the correlation between XRP's price and probability decreases over the weekend. For example, the 15-minute chart might show a decline, but the probability might be around 0.5, indicating manipulation by funds.

This is an extreme case of predicting structural vulnerabilities in the market .

3️⃣ Automated arbitrage based on volatility and probability (Total profit: 448K)

PM trader distinct-baguette focuses on the binary market of cryptocurrency prices (settling $1 Yes/No), achieving a profit of $448,000 through 26,756 trades.

Its core strategy lies in using volatility and probability arbitrage to build an automated model.

Wait for the repricing moment during volatility or panic, and when the sum of the probabilities of "Yes" and "No" is less than 1, buy both.

By employing stable position management and highly frequent repetitive operations, small pricing discrepancies are transformed into scalable profits. The average profit per trade is $17.

4️⃣ News-driven discretionary trading (total profit 850K)

Car

@CarOnPolymarket

He is among the top 0.01% of traders on Polymarket, with a historical profit of 850K.

His approach differs from the arbitrage mentioned earlier; instead, he engages in news trading between different popular sectors such as politics and macroeconomics.

When major news breaks, quickly analyze the impact of the event on related markets and decisively build positions accordingly.

When market sentiment slows down and the market moves sideways, he immediately takes profits and leaves the market, never waiting until the settlement stage.

Example: GTA 6 (Grand Theft Auto 6) is a game developed by the American game company Rockstar Games. It's hailed 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 the office fire first broke, the price of "Yes" on Polymarket regarding whether GTA 6 could be released before 2025 was still low. The market hadn't fully priced in the impact on GTA 6's development progress. Car seized this information window, buying "No" or selling "Yes". As the fire news spread virally on social media, everyone followed suit, buying "No". When the news reached its peak and the price had already reflected the fire's impact, Car immediately took profits and closed the position.

This approach, which relies on breaking news, relies solely on probability adjustments, and does not wait for settlement, is the way of playing in the prediction market that is closest to the mindset of a professional trader.

5️⃣ Reversal Trading: Betting the Market Was "Too Confident" (Total Profit 6K)

The market always has the potential for reversals, and some traders specifically bet on these reversals. According to Dune data, Polymarket's accuracy rate is 95.4% four hours before settlement, 89.4% twelve hours before settlement, and 88.2% one day before settlement. Therefore, these traders specifically target these market segments to profit from the possibility of reversals, typically buying at prices no higher than 10¢ – a classic low-probability, high-reward strategy.

III. Three suggestions from Biteye for ordinary players

Polymarket's record-breaking monthly trading volume and the emergence of numerous profitable cases indicate that the market is gradually maturing. While arbitrage opportunities are being squeezed, the increased market depth and breadth are also creating more new opportunities that rely on knowledge and strategy.

Here are three suggestions from Biteye:

1️⃣ Away from the battlefield of robots

Due to the mainstreaming of Polymarket, simple Yes+No <1 arbitrage has become a game between robots.

2️⃣ Learn to copy homework

By monitoring the activities of top wallets and new wallets (which may be front-running) using on-chain analytics tools, and combining this with research on news/events, we can make bets and engage in subjective trading based on pricing discrepancies.

3️⃣ Dynamic profit-taking, never be greedy.

The odds in market predictions are dynamic; once your judgment is reflected in the market, the advantage has already been realized. Profiting early and transferring the profits to later retail investors can significantly improve capital turnover and mitigate the risk of disputes during final settlement.

In conclusion: Cognitive bias is your arbitrage opportunity.

Prediction markets are moving from a niche market to the mainstream, and profit models are evolving from simple arbitrage to knowledge-driven approaches. Understanding the rules, mastering information, and maintaining discipline are essential for becoming a long-term winner in this game of probability.

Predicting the market doesn't involve betting on the truth, but rather on cognitive biases. Are you ready?