How Polymarket Arbitrage Works: A Complete Guide

The Core Principle: YES + NO = $1.00

Every Polymarket event resolves to exactly $1.00 or $0.00. If you hold both YES and NO for the same market, one of them will pay $1.00 per share at resolution — guaranteed. The question is: what did you pay for both sides?

When order book imbalances temporarily push prices down, it's possible to buy YES and NO at a combined cost below $1.00. The difference between what you paid and the guaranteed $1.00 resolution payout is pure, risk-free profit.

Three Types of Polymarket Arbitrage

1. Direct Spread Arbitrage

The most common form. Occurs when the best ask price for YES and the best ask price for NO in the same market sum to less than $1.00. This happens when one side of the book experiences a large sell order, temporary low liquidity, or a delayed repricing after news breaks.

Direct spread arbitrage is pure and reliable — no event judgment required. The resolution outcome is irrelevant. Mathematical certainty guarantees the profit.

2. Cross-Market Correlation Arbitrage

Related Polymarket events should be logically consistent. A specific candidate winning a primary should always have a price at or below the broader category (the party winning). If it doesn't, a logical violation exists — and it represents a mispricing across two markets rather than within one.

This requires maintaining a dependency graph of market relationships and running continuous consistency checks — a task suited to automated systems, not manual monitoring.

3. Time-Decay Arbitrage

As markets approach resolution, prices should rapidly converge toward 0% or 100% as the real-world outcome becomes clearer. Markets that lag behind breaking developments — due to low liquidity or slow participant reaction — create time-sensitive directional opportunities.

This form carries more risk than pure arbitrage, as it depends on the market eventually correcting before resolution, not a mathematical guarantee.

Why Arbitrage Windows Close So Fast

Polymarket has an active community of professional algorithmic traders monitoring the same order books. A pricing violation visible to you is simultaneously visible to every automated bot watching the WebSocket feed. The fastest executor captures the spread — everyone else sees it already corrected.

Typical direct spread windows last 2 to 15 seconds. Correlation violations persist slightly longer — minutes, occasionally hours — before the related markets reprice. Time-decay opportunities can last hours but carry higher directional risk.

Transaction Costs: The Hidden Constraint

Not every detected spread is profitable after costs. Polymarket charges a taker fee (typically 0.5% per side), and Polygon transactions carry a small gas cost. A gross spread of $0.03 per share may be unprofitable after fees.

• Minimum viable gross spread: approximately $0.015–$0.02 per share depending on position size
• Polymarket taker fee: 0.5% of notional value per filled leg
• Polygon gas cost: negligible at current gas prices (~$0.01–$0.05 per transaction)
• Slippage: partial fills at a worse price than the detected opportunity

Polysized validates every detected spread against real-time fee estimates before submitting orders — only executing when the net-of-cost profit is positive.

Automating Arbitrage with Polysized

Manual arbitrage on Polymarket is not viable — by the time you detect a spread, calculate costs, open both order forms, and execute, the window has already closed. The strategy fundamentally requires automation.

Polysized's arbitrage engine monitors every active Polymarket order book via persistent WebSocket connections, validates detected spreads against live fee estimates, and routes orders through dedicated Polygon RPC nodes for sub-100ms execution — all running continuously on managed infrastructure with no VPS setup required.