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fooker 2 days ago

Don’t be gullible enough to fall for this bad math.

Say 70% of the time it resolves to ‘no’, you still don’t make money by blindly choosing ‘no’.

Guess why?

Hint: This strategy is also described with the macabre analogy: picking up pennies in front of a steamroller.

Do you want to pick up pennies in front of a steamroller?

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lokar 2 days ago | parent | next [-]

Fall for it? I think it's pretty clear the author is not trying to convince any one of anything. It's mostly a joke.

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Majromax 2 days ago | parent | prev | next [-]

> picking up pennies in front of a steamroller.

This or any other statistical play is only 'in front of a steamroller' if you do it with leverage, especially if notionally uncorollated bets suddenly move together. Bets on Polymarket have limited downside by design, and bets in different categories are obviously unrelated to each other.

Without having looked into this in detail, however, I suspect the problem would be limited capacity; markets that are both deep and so trivially irrational are probably fairly infrequent. You might pick up pennies but only pennies.

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fooker 2 days ago | parent [-]

Leverage is not the steamroller here.

It’s the 90% chance of making 1$ vs 10% chance of losing 100$.

The exact numbers vary, the expectations even out with high volume stocks but prediction markets do not because of rounding that favors the house.

	▲	Majromax a day ago \| parent [-]
		That's just the binary nature of the bet. You address that in a real trading strategy with (fractional) Kelly position sizes. Anyone doing this for actual money would also be well served by implementing continuous monitoring and active risk management over top, in order to limit maximum drawdowns if the trend evaporates.

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lxgr a day ago | parent | prev | next [-]

The math here isn't what you assume it is. It isn't "most markets resolve to no"; it's "markets consistently value 'yes' too highly", and there is some evidence for the latter.

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fooker a day ago | parent [-]

Go on, give it a try for a few days.

My point is equally valid for "markets consistently value 'yes' too highly".

The occasional 'no' will wipe you out on average.

	▲	lxgr a day ago \| parent [-]
		I have no idea if the bias is strong enough to profitably trade on it (or whether it even exists). But your statement seems stronger, i.e. that such a strategy is somehow fundamentally and inherently impossible, so I think it's on you to explain why that is supposedly the case. For example, assuming a hypothetical consistent "yes" bias of 10%, would you still say it's impossible? Why? Basically, are you saying it's impossible because of the actual observed "yes" bias being too weak or for some other reason?

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fer 2 days ago | parent | prev [-]

Whether it's pennies in front of a steamroller will depend on the entry price, EV, time left to resolution and many other variables.

Though I agree it's bad math, even if 70% resolve to no, there's a high variance among all of them, and to know whether it's a good bet or not... you have to do your DD on that particular market. Even if you follow the Kelly criterion, randomly choosing bets will probably tank your bankroll sooner or later.

	▲	fooker 2 days ago \| parent [-]
		> Whether it's pennies in front of a steamroller will depend on […] many other variables. No, all these variables cancel out. If you were picking and choosing, yes. But this approach is basically betting no on all the markets. The textbook explanation of this is the central limit theorem, proving this mathematically is a bit more involved for power-law systems like this but it’s empirically valid.