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Comment by cordwainersmith | Hacker News Reader

The contrarian bet is fun but I wonder how it actually holds up. Prediction markets do tend to overprice dramatic outcomes, so "always bet no" isn't as dumb as it sounds. Would love to see real P&L over a few months, not just the thesis.

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I've backtested this kind of strategy, and it had a good return (like 100% APR), but then I realized it was cheating by knowing when things are going to resolve. Often times it's not clear. Your return depends a lot on how quickly you can get your money out. I never got around to trying a strat that doesn't know the resolution time, which actually has to be manual cause it takes some judgement to pick things that you expect to resolve soon.

Also requires a lot of volume to be "predictable" obviously, since 1 loss sets you back 10-20 wins. It's surprisingly hard to find reasonable-liquidity markets after all your filtering. Many have huge spreads or thin books. Scare quotes around "predictable" because you never know if others will use this strat or a lot of unlikely events will happen due to insiders.

Another thing, just like the author, I was excluding sports in all the above. Yes Polymarket is famous for letting people bet on world events etc, but turns out it's still more about sports. Betting on the overdog in sports markets seems more appealing because there are plenty of those events with large volume, they're kinda homogenous, you know exactly when they resolve, and they're harder to rig. I simply never got around to putting real time or money into the overdog strat.

> One loss sets you back 10-20 wins.

didn't look at the numbers, but this one sentence reminds me of selling options for 'passive income' (don't do that)

I drew the same analogy. You put up $0.95, a YES gambler only puts $0.05 (ignoring spread); you're providing "insurance" in case of a YES. In theory, even if the market prices reflected the true probability of the event happening, the more expensive side should be netting some "insurance premium" on average, right? Not sure, and idk how to observe if that's happening.

Polymarket is also holding onto the money in the meantime. Idk what they do with it, but it's not like some other platforms where they at least work with a bank to earn you some tiny interest on it.

They probably make interest off it themselves, so to give you any interest would cut into their margins.

Quintessential hustler logic: inability to compare the gains from wins to inevitable losses.

LTCM doing that was an early example of "too big to fail". In the late 90s.

I assume all the 'no' bets have to have an explicit end date, otherwise the 'no' bet could never win? The time horizon is never unknown on these bets.

The time horizon is unknown sometimes. One example event, "what will happen before GTA VI?" with markets like "China invades Taiwan" and "Jesus Christ returns." The NO for the second one is only 52c rn. Maybe that resolves if GTA VI is permanently canceled?

Yeah, those sorts of bets seem clearly bad unless there is an explicit time limit on them. Factoring in how long your capital is locked up in the bet and the opportunity cost of it being locked up has to be accounted for in determining your expected gains.

Right, my backtest expressed everything as % APR, not just P&L

Forgot to add, I wet-ran the non-sports strat once with $100 and lost like $5 net across the month. Not enough diversification like I said, so yeah maybe I'd make $6 the next month. I could only find like 10 things that met all the criteria: ≥90c price, low spread, thick enough ask ($5?), not sports, not related to certain topics that I thought were rigged (eg Mr Beast, Trump saying keywords in speech), likely resolving within a week. Some of them also weirdly took longer to resolve than the title suggested.

> 1 loss sets you back 10-20 wins

Good old eat like a bird, poop like an elephant.

I'm pretty into prediction markets and have some strategies that make me small, but consistent returns.

I think timing is the missing piece of this. Just randomly betting no on everything likely isn't going to give good results, but if you tied in a news API and just bet no on anything related to a major story right after the news starts picking it up, I would expect you could make a solid return.

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