Arbitrage on Polymarket

Arbitrage on Polymarket is different from normal crypto exchange arbitrage because you’re trading probability contracts (YES/NO shares) instead of spot tokens.

Since you’re already building bots and working with Polymarket APIs, I’ll explain this in a practical, implementation-ready way.

🔵 1️⃣ How Polymarket Pricing Works

On Polymarket:

Each outcome trades between $0.00 and $1.00

YES price + NO price ≈ 1.00

At resolution:

Winning side = $1
Losing side = $0

If total implied probabilities ≠ 1, arbitrage exists.

🔥 2️⃣ Core Arbitrage Strategies
✅ A) YES + NO Imbalance (Same Market Arbitrage)
If:
YES = 0.48
NO = 0.47
Total = 0.95

You can buy both:

0.48 + 0.47 = 0.95
Guaranteed payout = 1.00
Profit = 0.05 (5%)

This is risk-free if both fill fully.

⚠️ Reality:

This rarely stays open long

You must:

Execute simultaneously

Avoid partial fills

Account for fees

✅ B) Multi-Outcome Market Arbitrage

Example: 3-candidate election

Candidate Price
A 0.40
B 0.35
C 0.20

Total = 0.95 → Arbitrage exists

Buy all three → Guaranteed profit.

✅ C) Cross-Platform Arbitrage

Compare Polymarket vs other platforms:

Kalshi

PredictIt

Example:

Platform YES Price
Polymarket 0.52
Kalshi 0.60

Buy YES on Polymarket, hedge on Kalshi.

⚠️ Risk:

Withdrawal delay

Settlement differences

Regulatory differences

✅ D) Cross-Market Logical Arbitrage (Advanced)

Example:

Market 1:

"Trump wins 2024 election" = 0.55

Market 2:

"Republican wins 2024 election" = 0.50

If Trump is main Republican candidate:

There may be mispricing between logically dependent markets.

This is where serious quant traders make money.

🚀 3️⃣ How To Actually Implement It (Bot Logic)

Since you’re already building trading bots, here’s what matters:

Step 1 — Pull Orderbooks

Use Polymarket CLOB API.

Monitor:

Best bid

Best ask

Liquidity depth

Step 2 — Compute Arbitrage Condition

For binary market:

if (best_yes_ask + best_no_ask < 0.999):
arbitrage = True

Add fee buffer:

if (best_yes_ask + best_no_ask < 0.995):

Step 3 — Execution Strategy

Critical problems:

❌ Partial fill risk

❌ Slippage

❌ Order cancellation race conditions

❌ Gas delays (if onchain settlement)

Best approach:

Use IOC / FOK orders

Or:

Place first order

Immediately hedge

Cancel if second leg fails

🧠 4️⃣ Where Real Money Is Made

In 2024–2025, most profitable strategies were:

Latency arbitrage

Cross-market dependency pricing

Gamma API data mismatch

Market resolution timing arbitrage

Retail traders rarely catch simple YES/NO imbalance.

Bots dominate.

📊 5️⃣ Profit Expectation (Reality Check)

Most common margins:

0.2% – 1%

Rare spikes: 2–5%

Very rare: 5%+

To scale:

You need volume

Fast infra

Auto capital rotation

⚠️ 6️⃣ Risks You Must Consider

Liquidity evaporation

Market suspension

Oracle resolution edge cases

API downtime

Smart contract risk

Capital lock until resolution

reference: https://github.com/kratos-te/polymarket-arbitrage-bot