Polymarket Arbitrage Explained: Risk-Free Profits in Prediction Markets

Arbitrage is the holy grail of trading: profit with zero risk. In prediction markets, it happens more often than you'd think.

The Basic Math

In a binary prediction market (YES/NO), the fair prices should sum to $1.00:

But markets aren't always efficient. Sometimes you'll see:

If you buy both YES and NO for $0.96, you're guaranteed to receive $1.00 when the market resolves. That's a 4.2% risk-free return.

Why Arbitrage Opportunities Exist

1. Market Fragmentation

Different traders have different information. The YES side might be dominated by political experts while the NO side has crypto traders. Their valuations don't always align.

2. Liquidity Imbalances

Large orders on one side can temporarily push prices without affecting the other side.

3. News Reactions

When news breaks, traders rush to one side. The opposite side often lags in adjusting.

4. Cross-Platform Gaps

Polymarket vs. Kalshi vs. PredictIt often have different prices for the same events.

How polyHFT Captures Arbitrage

Our arbitrage engine runs 24/7, scanning every market for opportunities:

Detection

For each market:
  yes_price = best_ask(YES)
  no_price = best_ask(NO)

  if yes_price + no_price < 0.99:
    opportunity_detected()

Execution

When we detect an opportunity:

1. Calculate optimal position size based on liquidity

2. Simultaneously submit YES and NO orders

3. Verify both fills

4. Log guaranteed profit

Speed Matters

Arbitrage opportunities last milliseconds. Our Rust engine detects and executes before slower bots even see the opportunity.

Real Arbitrage Capture

Here's an actual arbitrage trade from last week:

This trade executed in 43ms. The opportunity closed 200ms later.

Cross-Platform Arbitrage

Even more profitable: arbitrage between Polymarket and Kalshi.

Same event, different platforms:

Strategy:

1. Buy YES on Polymarket at $0.52

2. Sell YES on Kalshi at $0.58

3. Lock in $0.06 profit per share

polyHFT Professional and Elite tiers include cross-platform arbitrage detection.

The Compound Effect

Individual arbitrage profits are small (1-5%). But they add up:

And because it's risk-free, you can use higher position sizes than directional trading.

Why You Need Speed

Here's the catch: everyone wants arbitrage profits. Competition is fierce.

When an opportunity appears:

If your bot takes 200ms to execute, you'll never capture arbitrage. This is why polyHFT's Rust engine and co-located infrastructure matter.

Start Capturing Arbitrage

Arbitrage is the most reliable profit source in prediction markets. polyHFT makes it accessible:

Subscribe today and start earning risk-free returns.