Comment by smeej
16 hours ago
But the hitman still does not get the entire value of the contract. The hitman gets the value of the number of shares he can afford to buy, but that's not the whole contract by any means.
I think I understand what you're saying about the pricing. Am I correct in saying, then, that if the odds are 90% in favor of my living through the contract, the "No, smeej won't die today" price should be close to $0.10 (again, ignoring fees and the time value of money)?
If the hitman tries to buy in with 10% of the total funds already in the market, the odds/price are going to shift hard. It's going to devour a huge chunk of the order book. Any market that suddenly has someone come in at 10% of the whole market value is going to get a massive trading wick. So yeah, he'd get some shares at $0.10, but he's probably going to eat the open order book to a much higher cost. He can 10x some very small portion of his money (however many shares are on the book at $0.10), but he can only 5x his money at $0.20, or 3x at $0.33.
Even if we assume he does have $50k to dump into the market, I still don't see how he's going to more than triple his money, which is a heck of a lot less than taking the entire market's value as though it were a bounty.
A risky bet can give back much more than 3x the money. Take this absurd one for example, it seems like it's offering up to 9x on a yes bet right now: https://polymarket.com/event/us-civil-war-before-2027
(I don't know how much volume is available, nor do I endorse betting on either side of things like this)
Yes - we agree on how the pricing and odds work now :)
The hitman shouldn't expect to capture the value of the entire open interest. The market here is serving to negotiate the bounty with speculators betting that too much was offered taking the rest (a privilege they pay for by buying contracts that only pay out if they don't take too much). It's a curious form of negotiation since the people paying for the murder don't participate... but should (in a very theoretical efficient market) come to a "fair" (large enough to get the job done, and no larger) payment for the hitman.
2xing your money in a night is a huge payout, I think you're overestimating how high the multiplier on the capital requirement needs to be. That said, if you aren't, and you need a 5x payout to find a hitman then no rational speculator would purchase contracts for more then $0.20...
It's only a huge payout if you have a huge amount of money. If you have $1k to put in, you get $2k out. Who's risking getting caught and potentially facing the death penalty for $1k in profit?
If someone already has significant money backing, and especially if that person already has some other specific reason to want you dead, I can see how it might be added incentive, but even so, you also now have to tip your hand. To buy in hard, you have to send a signal saying you have reason to be confident I'm about to die. You're basically shooting yourself in the foot right before trying to shoot me in the head.
Plus, it's not like the markets are anonymous. Polymarket isn't trading with Monero. You're not just tipping your hand ahead of time. You're pointing the investigators right at yourself.
I just don't see how the calculations end up falling in favor of killing somebody if you weren't already planning to do so.