Binary Outcome Arbitrage on Polymarket with Paired Limit Orders

Summary

The article develops a paired-order strategy for short-duration binary prediction markets. Since one of two mutually exclusive outcomes should pay one dollar at settlement, buying both sides below a combined cost of one can lock in a gross payout advantage. The proposed opening signal looks for a sharp move that temporarily leaves the two contract prices out of sync. Instead of waiting for the second side to become cheaper, the revised method submits both limit orders together, setting the second limit from a target combined price.

The implementation adds controls for unpaired exposure: a floor-price stop, an early profit exit, and separate handling near settlement, when the strategy cancels outstanding orders and may close a losing leg. It also describes order confirmation timeouts, slippage, redemption of settled positions, and a live monitoring panel. A sample trade reports fills below the target combined cost, but no systematic backtest or long-run performance evidence is provided. Opportunities depend on temporary dislocations, while a first leg can remain exposed if the hedge does not fill; thresholds trade off fill frequency against potential margin.

Key ideas

• Buying both binary outcomes below their combined settlement value can create a gross payout edge without forecasting direction.
• The strategy seeks temporary price mismatches after sharp moves and submits paired limit orders to cap the combined entry cost.
• A partially filled first leg creates directional exposure, so the design uses price stops, early exits, and settlement-time rules.
• Order confirmation, cancellation, slippage, and redemption handling are part of the trading process.
• The reported example is not evidence of durable performance, and the strategy may stay idle in calm markets.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.