How do I make $100,000 by predicting market arbitrage?

Author: Pix

Compiled by: Luffy, Foresight News

Most people are gambling in the forecast market, and I am arbitrage in the forecast market. Here are my specific strategies for earning $100,000 from a diversified, inefficient forecasting market.

Step 1: Understand the rules of the game

Prediction Markets allow you to bet on the outcome of real-life events, such as:

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

Each market has a different user group, and each group has its own biases. This means that the pricing of the same event will be different on different platforms, and that is exactly where the opportunity lies.

Case: If Platform A's "will" quote is $0.4 and Platform B's "will" quote is $0.55, then no matter what the result is, you can lock in a profit of $0.05, which is arbitrage.

Step 2: Find your strengths

The most effective strategy for me is multi-result markets, which are most likely to have pricing errors.

Example:

• Who will win the F1 championship this weekend?
• Which party will win the British general election?
• Who is the next one to be eliminated in "Love Island"?

In theory, the sum of the probability of all results should be 100%, but in reality, there are often cases where the sum reaches 110%.

Cause: Platforms usually charge hidden fees ("excess premium") and the odds are determined by users, resulting in a large number of inefficient pricing.

Step 3: How to determine whether 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 USD, arbitrage is available.

Real case: Who is the next pope?

The quotes for the two platforms are as follows:

The strategy is to buy all the results, and there must be one of them that will be achieved, which ensures you get $1. Profit per transaction is $0.021 (2.1% risk-free return), which is arbitrage. You are not betting on who will become the Pope, but you are betting on who will become the Pope. And when they disagree, you can make money.

Myriad has much worse liquidity, but there are two other sites that have a closer price spread. If you focus on more markets, you will find greater advantages.

I usually only arbitrage if the APY is above 60% (APY = (Spread/Solution Days) × 365).

In this case, the event ends 29 days later:

(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 a delay game:

After a price difference, there is usually only a few minutes window, not a few hours; rumors spread, platform update lag, etc. will lead to price spreads, and your advantage only exists during this period.

If possible, automate this section and use price reminders on Discord, Telegram and Twitter. Sometimes I can find the price difference by just relying on my muscle memory. The faster you move, the more you earn. After hesitating for 5 minutes, the price difference disappeared. The best spread I've achieved is 18%, and the profit is quite considerable.

It should be noted that you ensure that each platform has available funds and be clear about the handling fees.

Step 5: Exit early

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

Suppose I buy all the results for $0.94 so I have the $0.06 spread. I don't have to wait for the results, if the market tightens, I can sell it for $0.98 or $0.99 and I'll exit.

This can greatly improve APY and quickly switch to the next market.

Additional Tips

• Looking for overlapping events: For example, "Trump wins the 2024 election" and "Republican victory" may have hidden arbitrage;
• Targeting small markets: more pricing errors and less competition;
• Utilize niche platforms: the price spread is larger, and there may be airdrop rewards;
• Read the settlement rules carefully: a word may change the result;
• Careful verification: Confirm the order book and transaction price, and calculate all handling fees.

Summarize

I earned $100,000 in more than 2 months, and I was dull and busy during the period. The greater the volatility, the more the price difference, but even if the market is calm, there will always be the next inefficient market waiting to be discovered.