Breaking down Polymarket's five major arbitrage strategies: How can regular players seize million-dollar opportunities?

Author: Changan I Biteye Content Team

In prediction markets, the essence of betting is not about the truth, but about pricing deviations.

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

Some rely on intuition to place bets, others follow emotions; but truly long-term profitable players extract risk-free or high-probability profits from these pricing imbalances through systematic strategies.

This article by Biteye systematically breaks down:

• The most mainstream and truly existing arbitrage logic in prediction markets
• Multiple real arbitrage cases, showing how experts make money
• Whether ordinary players still have opportunities in a highly competitive environment

1. The Five Major Arbitrage Schools: From Mathematics to Manipulation, Which One Do You Belong To?

1️⃣ Platform-internal “Money Snatching” Arbitrage: When YES + NO < 1

Principle: Exploit the mathematical property that binary options must settle to 1, monitoring moments when the sum of YES and NO prices is below 1, and simultaneously buying both sides. Profit from the price difference at settlement.

Example: When the total is 0.97, buy both sides. Regardless of the outcome, you will receive $1 at settlement, with a profit of 0.03.

⚠️Tip: Currently highly competitive, monopolized by high-frequency bots, retail traders have little chance.

2️⃣ Cross-platform Arbitrage: Rule differences create opportunities

Principle: Capture price discrepancies for the same event across different prediction platforms (e.g., Polymarket, Kalshi, Opinion Labs, Limitless), buy low and sell high to lock in profits.

Example: On Polymarket, the Yes price for an event is 45¢, while on Kalshi, the equivalent No price is 52¢ → lock in the spread.

⚠️Tip: Different rules or oracles on each platform may lead to different settlement outcomes.

3️⃣ “Race” Information Arbitrage: A few seconds ahead of the market is enough

Principle: Use off-chain data (such as live sports broadcasts, real-time vote counts) that update faster than on-chain order books to perform lightning-fast orders.

This likely originated from traditional hedge funds, which during Federal Reserve meetings, use algorithms to fetch live Fed speeches. If keywords like “Dovish” (e.g., neutral, easing, moderation) appear more frequently than expected, the algorithm quickly sweeps all sell orders on Treasury futures or S&P 500.

⚠️Tip: Common in prediction markets for sports events too. Live stadium audiences or dedicated high-speed streams are often 5-10 seconds faster than TV broadcasts.

4️⃣ Negative Risk Arbitrage: Hedge principal with probability distributions

Principle: In markets involving multiple mutually exclusive options (e.g., elections or multi-party contests), simultaneously hold multiple NO positions. Use the deviation in market pricing of probabilities to hedge principal risk.

⚠️Tip: Essentially, use mathematical probability distributions to ensure profit in most outcomes, and even in worst-case scenarios, maintain breakeven or minimal loss.

5️⃣ Order Book Spread Market Making Arbitrage: Low liquidity = more opportunities

Principle: In newly launched or low-liquidity markets on Polymarket, profit from the bid-ask spread by placing orders.

Example: In a certain market, bid price: 0.3, ask price: 0.7, spread of 0.4. Buy at 0.31 and sell at 0.69 to earn the middle spread.

⚠️Tip: Pay attention to order book data, but beware of market sentiment/news causing one-sided orders, and choose familiar sectors for operation.

2. Real Case Review: How Top Traders Made Millions on Polymarket?

1️⃣ “Statistical” Arbitrage Based on Elon Musk’s Posting Volume

Prediction markets with continuous data and backtestable history.

For example, the market predicting Musk’s number of posts: traders analyze Musk’s historical posting data quantitatively to find deterministic patterns:

• Posts on workdays are 20 more than on weekends
• Winter activity is 3.1 times summer
• February is the most active month.

After analyzing potential variables, traders buy when probabilities significantly exceed expectations. Besides, many similar markets exist, such as NBA team home/away performance, average points scored, losses, modeled mathematically for betting.

2️⃣ 15-Minute Market Manipulation Arbitrage (Total profit $280K)

Trader a4385 exploited the vulnerability of Polymarket’s short-term prediction markets during low liquidity periods by small costs to manipulate spot prices and reverse-pick the opposing side.

Weekend token markets are shallow, so small funds can cause price swings.

He bought “up” on XRP 15Min price predictions on PM, even forcibly sweeping the order book regardless of odds. Near the 15-minute settlement, he used $1 million on Binance to instantly push XRP spot price up, causing the 15Min K-line to close higher.

Currently, a4385’s total profit on Polymarket is $280K, with an average drawdown of about $6,000.

If you observe carefully, sometimes the correlation between XRP price and probability during weekends weakens. The 15Min candle closes down, but the probability remains around 0.5—indicating further manipulation.

This is an extreme case revealing structural loopholes in prediction markets.

3️⃣ Automated Volatility + Probability Arbitrage (Total profit: $448K)

Trader distinct-baguette focuses on binary crypto markets (settling at $1 Yes/No), achieving $448K profit through 26,756 trades.

Core strategy: Use volatility + probability arbitrage to build automated models.

When volatility or panic causes re-pricing, buy both sides when the sum of probabilities for “Yes” and “No” drops below 1.

Employ stable position management, repeatedly executing at high frequency, turning tiny pricing deviations into scaled profits. Average profit per trade: $17.

4️⃣ News-Driven Subjective Trading (Total profit $850K)

@CarOnPolymarket is among the top 0.01% traders on Polymarket, with a total profit of $850K.

His approach differs from the above arbitrage, focusing on news trading across hot sectors like politics and macroeconomics.

During major news events, he quickly analyzes the market impact and takes positions decisively.

When market sentiment slows or consolidates, he immediately takes profits and exits, never waiting for settlement.

Example: GTA 6, developed by US game company Rockstar Games, is one of the most anticipated games globally. Any news about its development or release date triggers huge attention. When news of a fire at the office breaks, the Yes price for “GTA 6 can be released before 2025” on Polymarket is still low. The market hasn’t fully priced in the impact of the fire. Car seizes this window, buying “No” or selling “Yes.” As the fire news spreads virally on social media, many follow suit and buy “No.” When the hype peaks and prices reflect the fire’s impact, Car quickly takes profits and closes the position.

This approach, based on breaking news, probability correction, and not waiting for settlement, is closest to professional trading mindset in prediction markets.

5️⃣ Reversal Trading: Betting on “Overconfidence” (Total profit $6K)

Prediction markets often experience reversals. Some traders specifically bet on the likelihood of reversals. According to Dune data: the accuracy of Polymarket’s 4-hour pre-settlement predictions is 95.4%, 12-hour accuracy is 89.4%, and 1-day accuracy is 88.2%. These traders buy reversal probabilities at usually no more than 10¢, employing a small-probability high-odds strategy.

3. Biteye’s Three Tips for Ordinary Players

Polymarket’s monthly trading volume hits new highs, with continuous profitable cases emerging, indicating the market is maturing. Although arbitrage opportunities are increasingly squeezed, improvements in depth and breadth also create new opportunities relying on cognition and strategy.

Here are three tips from Biteye:

1️⃣ Stay away from the bot battlefield

As Polymarket becomes mainstream, simple arbitrage like Yes+No <1 is now dominated by bots.

2️⃣ Learn to copy strategies

Monitor top wallets and new wallets (possible “mice” or front-runners) using on-chain analysis tools, combined with news/event research for subjective trading based on pricing deviations.

3️⃣ Use dynamic take-profit, never be greedy

Odds in prediction markets are dynamic. When your judgment is confirmed by market reactions, your advantage is realized. Taking profits early can greatly improve capital turnover for retail traders and reduce dispute risks at settlement.

Final Words: Cognitive Biases Are Your Arbitrage Space

Prediction markets are moving from niche to mainstream, with profit models evolving from simple arbitrage to cognition-driven strategies. Understanding rules, mastering information, and maintaining discipline are key to becoming a long-term winner in the game of probabilities.

Prediction markets don’t bet on the truth, only on cognitive biases. Are you ready?