How do I make $100,000 with prediction market arbitrage?

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Author: Pix

Compiler: Luffy, Foresight News

Most people gamble on the prediction market, and I arbitrage in the prediction market. Here's my specific strategy for making $100,000 from a fragmented, inefficient prediction market.

Step 1: Understand the rules of the game

Prediction markets allow you to place bets on the outcome of real-world events, such as:

  • "Will Ethereum go up to $5,000 by the end of the year?"
  • "Will MrBeast run for president?"
  • "Will Kanye West issue tokens?"

Every market has a different user base, and each group has its own biases. This means that the same event will be priced differently on different platforms, and that's where the opportunity lies.

Example: If the "would" quote of $0.4 for platform A and the "no" quote for $0.55 for platform B, then you can lock in a profit of $0.05 regardless of the outcome, which is arbitrage.

Step 2: Look for your strengths

The strategy that works best for me is multi-outcome markets, which are most prone to pricing errors.

Example:

  • Who will win F1 this weekend?
  • Which party will win the UK general election?
  • Who will be eliminated next in "Love Island"?

Theoretically, the sum of the probabilities of all outcomes should be 100%, but in practice it is common to see the sum of 110%.

Reason: Platforms often charge hidden fees ("excess premiums") and the odds are determined by users, resulting in a lot of inefficient pricing.

Step 3: How to determine if there is an arbitrage opportunity

Core Rules:

  • Find the same event on different platforms;
  • Choose the lowest price for each result;
  • If the total price is less than $1, you can arbitrage.

Real-life case: Who will be the next pope?

The offers for both platforms are as follows:

The strategy is to buy all the results, one of which will be realized, which ensures that $1 is obtained. With a profit of $0.021 per trade (2.1% risk-free reward), this is arbitrage. You're not betting on who will become the pope, but you're betting that the two platforms can't agree on who will be the pope. And when they disagree, you make money.

Myriad has much less liquidity, but there are two other sites with spreads that are closer. If you focus on more markets, you'll find greater advantages.

I usually only arbitrage when the APY is above 60% (APY = (spread / days to resolution) × 365).

In this example, the event ends after 29 days:

(0.021 / 29) × 365 ≈ 26.4% APY (60% below my threshold, give up).

If the event ends after 7 days:

(0.021/7) × 365 ≈ 109.5% APY (decisive entry).

Step 4: Race against time

Predicting market arbitrage is the delay game:

When there is a price difference, there is usually a window of minutes, not hours; Rumors spread, lagging platform updates, etc., can all lead to spreads, and your advantage only exists during this time.

If you can, automate this section and use price alerts on Discord, Telegram, and Twitter. Sometimes I can spot the spread just by muscle memory. The faster you act, the more you earn. Hesitate for 5 minutes and the spread disappears. The best spread I've ever achieved is 18%, which is quite profitable.

It is important to make sure that each platform has available funds and that you are aware of the fees.

Step 5: Exit early

Most people waited for the results to be revealed, and I took profits before the results were clear.

Let's say I buy all the results at $0.94, so I have a $0.06 spread. I don't need to wait for the results, if the market tightens and I can sell at $0.98 or $0.99 and I'll be out.

This can dramatically increase APY and quickly switch to the next market.

Bonus tips

  • Look for overlapping events: e.g. "Trump wins the 2024 election" vs. "Republicans win" There may be hidden arbitrage;
  • Targeting small markets: more pricing errors and less competition;
  • Take advantage of niche platforms: wider spreads and possible airdrop rewards;
  • Peruse the settlement rules: one word can change the outcome;
  • Careful verification: Confirm the order book, transaction price, and calculate all handling fees.

summary

I made $100,000 in just over 2 months, and it was both dull and busy. The greater the volatility, the more spreads, but even if the market is calm, there is always the next inefficient market waiting to be discovered.

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