How to achieve an annualized 40% return through arbitrage on Polymarket?

Practical Analysis of Prediction Market Arbitrage Strategies: Using Cross-Market Price Differences on the Polymarket Platform, Locking in Arbitrage Opportunities Through Three Different Hedging Strategies, with an Annualized Return Rate of Up to 41%. Detailed Explanation of Live Operations and Key Points for Risk Management. This article is sourced from @igor_mikerin BlockBeats’ article “Arbitrage in Polymarket. 30,000$/month.” and is organized, translated, and written by BlockBeats.

(Previous context: After profiting $4 million, assets wiped out in a week: The fall of Polymarket’s sports betting king) (Background supplement: Polymarket announces its return to the US: Approved by the CFTC, operating as a “Designated Contract Market” for intermediary trading platforms)

As the US election approaches, trading activity in prediction markets is heating up. On December 9, 2025, discussions on the X platform about Polymarket arbitrage focused on cross-platform price differences, automated trading bots, and hidden risks. As price gaps between Kalshi and Polymarket appear more frequently and technical barriers continue to rise, prediction markets are evolving from “speculation venues” into true arbitrage infrastructure.

Short-lived opportunities, thin liquidity, rule differences, and black swan events remain the main challenges. The author of this article demonstrates arbitrage structures with live trades, providing a clear reference for the increasingly fierce competition in prediction market arbitrage.

The original text is as follows:

Arbitrage 1: Buy “Harris Elected President” and Simultaneously Buy All “Republican Wins by Different Electoral Vote Margins” Outcomes

This strategy is quite straightforward: on one side, you bet on Kamala Harris winning the presidential election; on the other, buy all possible Republican victory margin outcomes in the electoral college. Essentially, these two positions hedge each other. If the total price of both sides is less than 1, the difference is the locked-in yield—that is, the arbitrage opportunity. As of today, the arbitrage spread for this trade is 3.5%, with 41 days left until the election. Annualized, this equates to about a 41% return.

The chart below shows how I constructed this trade. You can see that I bought nearly the same number of shares for all possible outcomes.

This is my position on Polymarket.com. You can see that I basically bought the same number of shares in every possible outcome.

This is my real-time order summary on Polymarket. The average cost of these positions is 0.983, meaning my expected return is 1 – 0.983 = 1.7%. My most recent transaction’s cost basis was 0.979, corresponding to a return of 2.1%.

Arbitrage 2: Bet on Trump Winning and Hedge with “Democrats Win Popular Vote + Presidency”

This strategy currently shows a 2.55% arbitrage opportunity. In this combination, we bet on Trump winning while hedging by betting on the Democrats winning both the popular vote and the presidency. Although this isn’t a perfectly equivalent hedge (since it’s possible for Democrats to win the presidency without winning the popular vote), my model estimates the probability of this scenario is extremely low. Therefore, I consider this hedge structure to be robust.

Below are my actual trades, showing that I hold the same number of shares on both sides of the bet.

Arbitrage 3: Buy “No” for All Possible Democratic and Republican Popular Vote Outcomes

In this trade, I bought the “No” option for all possible popular vote outcomes. Currently, this arbitrage opportunity is 6.65%.

Below are my actual orders. Except for one of them, all other trades will win on election day. Therefore, the total profit from all winning positions (minus the one losing trade) needs to be greater than the amount lost on that losing trade.

Be Sure to Read the Rules Carefully

An important tip: always read the rules of each market carefully. Some positions may look like arbitrage opportunities but may hide significant risks. For example, if a candidate is assassinated, even if you think you’ve set up a “robust arbitrage,” you could still lose all your principal.

Price Spreads Matter

One of the biggest challenges I encounter is market impact. Due to low platform liquidity, when I place an order, I often push the entire market price in my direction. This can cause discrepancies between bid price, ask price, midpoint price, real-time price, and actual transaction price. Below is a typical example from the previously mentioned trades.

Good luck! [Original article link]

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