Prediction Market
|7 min ReadHow This Boring Polymarket Arb Quietly Turns Tiny Edges Into $30K Monthly Yield
Jax Morales
Senior Analyst
Published
Jan 16, 2026
1. The Core Idea: Turn Election Mispricings Into Synthetic Bonds
Polymarket is a prediction exchange where each contract pays 1 dollar if an event happens and 0 if it does not. In a perfectly efficient market, the prices of all mutually exclusive outcomes in a market would add up to 1. In reality, they often do not. The gap is where arbitrage lives.
The trader behind this thread says he has about 60,000 dollars deployed across a basket of US election markets and has identified several structures where the combined cost of covering all relevant outcomes is below 1. The difference is the locked in return, assuming the rules behave as expected and the event resolves cleanly.
His first example is simple in theory. He buys “Harris to be President” and at the same time buys every possible “Republican Electoral College margin” outcome. Those two sets of contracts are economic opposites. Either Harris wins and every GOP margin line settles to 0, or a Republican wins and exactly one GOP margin line pays out at 1.
On screen, the sum of “Harris to be President” plus all GOP margin outcomes has been trading below 1. Earlier in the month, the basket showed about a 3.5 percent edge with 41 days left to the election, roughly 41 percent annualised.
In practice, his actual fills tell a more modest story. Once you push real size through a thin order book, the blended entry cost creeps higher and the edge shrinks.
He has structured his positions so that he holds nearly equal size across all possible GOP margin lines while carrying the offsetting Harris exposure on the other side.
Across all these tickets, his average cost basis is around 0.983. That implies an expected gross return of 1.7 percent on the basket if everything settles as defined. His most recent clip went through at 0.979, roughly a 2.1 percent edge.
In a mature futures market this kind of mispricing would be crushed almost instantly. On a relatively young on chain prediction venue, it can sit there because only a handful of participants have the capital, the code and the patience to harvest it.
2. Three Election Structures, One Theme
2.1 Trump Versus A Democratic Hedge
His second structure flips the political side but keeps the same logic. He goes long “Trump to be President” and hedges that line with “Democrats to win the popular vote and the presidency”.
Mathematically, it is not a perfect hedge. In a US system, it is still possible for Democrats to win the presidency while losing the popular vote. Based on his own modelling, he treats that as a very low probability branch and focuses on the pricing. The basket implies about a 2.55 percent edge.
In his live positions, the sizing is again handled so that the number of shares on each side of the structure is tightly matched.
The payoff diagram is almost flat rather than perfectly flat. That is the tradeoff. You give up pure arbitrage for a small amount of political basis risk in exchange for a cleaner entry price.
2.2 Shorting Every Popular Vote Line
The third structure is the cleanest mathematically but the most unforgiving if you misunderstand a rule.
Here, he buys the “No” side on every possible Democratic and Republican popular vote contract. Only one of those lines can finish “Yes”. All the others will resolve to 1 on the “No” side.
If you size each “No” position correctly, the sum of all the winning “No” payouts should exceed the loss on the single losing ticket. On Polymarket’s current pricing, that basket shows about a 6.65 percent edge.
His actual wallet shows the full ladder of “No” tickets, with one of them destined to lose and the rest designed to offset that loss and leave a fixed profit.
On paper, that looks like the purest form of arbitrage prediction markets can offer. In reality, the risk lives in the fine print.
3. Rules, Tail Risks And Why “Free Money” Is Never Free
The author is very explicit about one thing that most retail traders ignore. Every market on Polymarket has its own resolution rules. They spell out what happens if there is an assassination, if results are delayed, if recounts drag on for months, or if some legal quirk changes how the outcome is interpreted.
A structure that looks risk free at the level of payout trees can turn into a disaster if one half of your basket gets voided and the other half settles to 0. In the extreme scenarios, you can be right about the election and still lose money because your hedge resolved differently than you expected.
On Polymarket, you are not just betting on politics. You are betting that a specific smart contract, with specific written rules, will be interpreted and executed the way you think it will. The edge is what is left after you have priced those tails correctly. Anything you ignore there is not arbitrage. It is hidden risk.
4. Liquidity, Spreads And The Real Constraint
The biggest practical constraint in all three structures is not the math. It is liquidity.
Polymarket is still small enough that a 5,000 or 10,000 dollar order can move the entire market. The screenshots from his account show wide gaps between bid, ask, mid, live marks and the actual execution prices he gets when leaning on the book.
That is why his headline 3 to 7 percent mispricings compress into 1 to 3 percent realised edges once he actually fills. The more you push, the more you eat your own alpha.
He is candid about this. Polymarket is not liquid enough to be his main focus, which is why he plans to go back to stock trading and simply let roughly 60,000 dollars of election exposure roll to expiry. With thin books and hard caps on size, “30,000 dollars a month” is not a scalable factory. It is a by product of being early in a niche market.
For serious traders in Brazil, the Gulf and elsewhere, the lesson is not that Polymarket is a magic ATM. The lesson is that any young market with complex rules and shallow depth will throw off pricing errors. If you have the data, the code and the discipline to model every branch, you can sometimes turn noisy narratives into something that behaves like a short duration bond.
Just remember what game you are actually playing. In a hyper financialised world, the line between investment and gambling is not the logo on the website. It is how carefully you treat risk in markets that look too easy.
Not investment advice. Do your own research.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.