Arbitrage sounds risk-free: buy logically equivalent payouts for less than their settlement value. In production, execution risk determines whether the apparent edge exists at all.
The basic binary-market calculation
If complementary outcomes settle to a combined $1, their executable purchase cost should normally approach $1 after costs. A combined price below that level may indicate an opportunity.
The calculation must use asks for the exact available size, not midpoints or stale last-trade prices. Fees and settlement rules belong in the same equation.
Why one unfilled leg changes everything
A bot may submit two orders but fill only one. At that moment it owns a directional position, not an arbitrage. Fast markets can move the second leg beyond the profitable boundary.
Execution logic needs price bounds, fill confirmation, idempotency, timeout handling, and an explicit response to partial fills. These details matter more than detecting the gap.
Equivalent wording may not mean equivalent settlement
Two markets can look related while using different deadlines, sources, definitions, or cancellation rules. Contract text must be normalized before prices are compared.
Cross-venue trades add funding, withdrawal, operational, and venue-specific risks. A mathematical relationship does not remove those risks.
A useful arbitrage checklist
Confirm identical economic outcomes, compute depth-weighted cost, reserve fees, cap order size, verify both fills, and preserve a recovery path for imbalance.
If profit disappears under realistic execution assumptions, it was a screen-level discrepancy—not a tradable arbitrage.
- Resolution equivalence
- Executable depth
- All fees
- Two-leg fill handling
- Recovery and audit trail
Frequently asked questions
Is Polymarket arbitrage risk-free?
No. Leg risk, liquidity, fees, rule differences, and operational failures can turn a price gap into a loss.
Why do arbitrage gaps disappear quickly?
Other participants reprice orders, and the displayed quantity at the profitable level may be very small.
Prediction-market trading involves substantial risk of loss. Past wallet performance, examples, and paper results do not guarantee future returns.
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